Super Power Earthmoving Limited v Dreamhome Construction Group Limited

[2024] NZHC 3349

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-2440

[2024] NZHC 3349

UNDER

the Companies Act 1993

IN THE MATTER OF

liquidation proceedings

BETWEEN

SUPER POWER EARTHMOVING LIMITED

Plaintiff

AND

DREAMHOME CONSTRUCTION GROUP LIMITED

Defendant

On the papers:	12 November 2024
Appearances:	Zhenzhen Chen / Sonali Ravindra for the Plaintiff Matt Taylor for the Defendant
Judgment:	12 November 2024

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 12 November 2024 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

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

Solicitors:

Righteous Law (Sonali Ravindra), Auckland, for the Plaintiff Maria Taylor, Auckland, for the Defendant

Counsel :

Zhenzhen Chen, GreenLane, Auckland, for the Plaintiff Matt Taylor, Meadowbank, Auckland, for the Defendant

SUPER POWER EARTHMOVING LIMITED v DREAMHOME CONSTRUCTION GROUP LIMITED [2024] NZHC 3349 [12 November 2024]

Introduction

[1]                 The Court delivered a judgment on 2 August 2024 dismissing the plaintiff’s application to put the defendant company into liquidation (the Judgment).1 At [52](b) of the Judgment, the parties were directed to endeavour to agree costs, failing which counsel were to file memoranda as to costs and a decision as to costs is made on the papers.

[2]                 Mr  Taylor,  for  the  defendant,  filed  a  memorandum  as  to  costs  dated    4 September 2024, and Mr Chen, for the plaintiff, filed a memorandum in reply dated 27 September 2024.

[3]                 The defendant is seeking costs on an indemnity basis or alternatively 2B scale costs with a 50 per cent uplift. The plaintiff opposes an award of indemnity costs or increased costs, and seeks an order that costs lie where they fall, or alternatively, that the defendant is awarded costs on a 2B basis only.

Legal principles

[4]Rule 14.6(4) so far as is relevant provides:

(4)The Court may order a party to pay indemnity costs if:

(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing or defending a proceeding or a step in a proceeding; or …

[5]                 It is clear from the authorities that a high threshold must be passed before an order for indemnity costs is to be made. In Bradbury v Westpac Banking Corp the Court of Appeal summarised the distinction between the three broad approaches to costs as follows:2

(a)a standard scale applies by default where cause is not shown to depart from it;

1      Super Power Earthmoving Ltd v Dreamhome Construction Group Ltd [2024] NZHC 2139.

2      Bradbury v Westpac Banking Corp [2009] NCZA 234; [2009] 3 NZLR 400; (2009) 19 PRNZ 385 at [27].

(b)increased costs may be ordered where there is a failure by the paying party to act reasonably; and

(c)indemnity costs may be ordered where that party has behaved either badly or very unreasonably.

[6]                 In Bradbury,3 the Court of Appeal endorsed Goddard J’s remarks as to some of the categories in which indemnity costs have been ordered:

(a)the making of allegations of fraud knowing them to be false, and the making of irrelevant allegations of fraud;

(b)particular misconduct that causes loss of time to the court and to other parties;

(c)commencing or continuing proceedings with some ulterior motive;

(d)doing so in wilful disregard of known facts or clearly established law; or

(e)making allegations which ought never to have been made or unduly prolonging a case by groundless contentions summarised in French J’s “hopeless case” test.

Increased costs

[7]                 Rule 14.6(3) provides for when increased costs may be ordered and provides that:

(3)       The court may order a party to pay increased costs if –

…

(b)      the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by –

…

3      Above, n 2.

(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or …

Defendant’s submissions

[8]                 Mr Taylor submits that the Court should award indemnity costs or increased costs as the plaintiff acted vexatiously and unnecessarily commenced and/or continued these proceedings, and points to the following in support of this:

(a)The plaintiff was put on notice of the significant hurdles it faced by counsel for the defendant in a letter dated 9 March 2023;

(b)by virtue of the Court’s judgment on 23 August 2023 on the defendant’s application for leave to file a defence out of time (the Leave Judgment)4 it ought to have been obvious to the plaintiff that its application was misconceived and could not succeed;

(c)the Judgment and the Leave Ludgment make it clear that the plaintiff was taking unnecessary steps in pursuing arguments that lacked merit, as is evident in that the plaintiff issued a statutory demand purportedly based on a debt due under the Construction Contracts Act 2002, in circumstances where it provided no proof that any construction contracts had been concluded and could not establish any contractual right to payment or to the significant interest amount included in the demand of $176.986.11.

[9]                 Mr Taylor seeks indemnity costs of $17,178.00 (excluding GST) together with disbursements of $193.65. Mr Taylor submits that if the Court is not prepared to award indemnity costs, then the defendant seeks scale costs on a 2B basis of $10,944.00 together with a 50 per cent uplift, being costs of $16,491.00 and disbursements of

$193.65.

4      Super Power Earthmoving Ltd v Dreamhome Construction Group Ltd [2023] NZHC 2265.

The plaintiff’s submissions

[10]              Mr Chen opposes an award of indemnity or increased costs on the following basis:

(a)The Judgment did not deny the merits of the plaintiff’s claim but rather determined that there may be arguable disputes that require a trial to resolve;

(b)the defendant had not proactively dealt with any claim of disputes with the plaintiff throughout the process and it only formally presented its disputes in the latest stage of the debt collection process;

(c)the plaintiff was proactive prior to liquidation proceedings to ensure it had taken appropriate steps and issued a letter of demand, and then communicated directedly with the defendant where it was agreed that there was no dispute regarding the invoices issued by it;

(d)the defendant was deemed to be unable pay their debts when they did not comply with the statutory demand in accordance with the Companies Act 1993, so it was a logical conclusion that the plaintiff would proceed to apply for liquidation;

(e)while acknowledging that costs should follow the event, the costs incurred resulted from the passive and evasive approach adopted by the defendant in respect of the debt.

[11]Mr Chen submits that costs should therefore lie where they fall.

Result

[12]              In my view it should have been obvious to the plaintiff that the application for liquidation of the defendant would not succeed following the Leave Judgment, and in my view by pursuing the liquidation proceeding the plaintiff was pursuing an unnecessary step (which was without merit having regard to the Leave Judgment) or

continuing proceedings unnecessarily. In the light of the submissions by Mr Chen as to the circumstances leading up to the application for liquidation, I do not think indemnity costs are appropriate as the plaintiff’s actions have not been sufficiently egregious to justify indemnity costs. However, in my view, increased costs are appropriate, being 2B costs with a 50 per cent uplift.

Orders

[13]              I order that the plaintiff is to pay the defendant costs of $16,491.00 being 2B scale costs, together with a 50 per cent uplift, together with disbursements of $193.65, totalling $16,684.65.

…………………………….. Associate Judge Taylor