Tyrion Holdings Limited v Infrastructure NZ Limited

[2018] NZHC 2856

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2013-404-004037

[2018] NZHC 2856

BETWEEN

TYRION HOLDINGS LIMITED

Plaintiff

AND

INFRASTRUCTURE NZ LIMITED

First Defendant

PAUL FREDERIC CLAYDON
Second Defendant

INFRASTRUCTURE & CIVILWORKS LIMITED

Third Defendant

Judgment: 6 November 2018

JUDGMENT OF COURTNEY J

[Costs]

This judgment was delivered by Justice Courtney on 6 November 2018 at 2.30 pm

pursuant to R 11.5 of the High Court Rules Registrar / Deputy Registrar

Date ………………………

TYRION HOLDINGS LTD v INFRASTRUCTURE NZ LTD & OR [2018] NZHC 2856 [6 November 2018]

[1]                 Following my dismissal of the plaintiff’s substantive claim1 I deal with the costs applications arising. The defendants seek costs on the substantive hearing. The plaintiff seeks costs on the interlocutory application determined by Brewer J.2

Interlocutory application as to plaintiff’s standing

[2]                 In the substantive proceeding the plaintiff, Tyrion Holdings Ltd, alleged that a director of Infrastructure NZ Ltd (INZL) misappropriated INZL’s assets in 2008. Tyrion was not a shareholder of INZL at the time but asserted that it was entitled to bring the proceeding under s 174 of the Companies Act 1993 on the basis that it subsequently acquired shares in INZL. The defendants challenged Tyrion’s standing to bring the proceedings. The matter came before Brewer J as a preliminary issue. He found that Tyrion had standing to bring the proceedings. He reserved costs on the application to be dealt with by the trial judge.

[3]                 The defendants acknowledge that costs generally follow the event and that, in the usual course, this means that Tryion would be entitled to costs on the preliminary question. However, they argue that costs on that application should lie where they fall because Tyrion was ultimately unsuccessful on its substantive claim and that the plaintiff’s conduct prior to the hearing of the preliminary issue should be taken into account. The plaintiff failed to comply with timetable requirements and, in particular, failed to provide its evidence in a timely fashion.

[4]                 As is to be expected, Tyrion considers that costs should follow the event in respect of the preliminary issue and it should have costs at scale. It acknowledges that there were delays in bringing the preliminary issue to hearing but claims that this was due to a number of factors, not only its own failings to act in a timely way.

[5]                 In my view, there is no basis on which to depart from the usual rule that costs should follow the event. I accept that there were a number of contributing factors to the lengthy delay in bringing that application to hearing. However, it is clear that on

1      Tyrion Holdings Ltd v Infrastructure NZ Ltd [2018] NZHC 1899.

2      Tyrion Holdings Ltd v Claydon [2015] NZHC 428.

a number of occasions the plaintiff was in breach of timetable requirements and as a result put the defendants to unnecessary cost. I accordingly order that the plaintiff will have costs at scale in respect of the preliminary issue subject to a 10 per cent reduction to reflect its failures in the lead-up to that hearing.

The substantive proceeding

[6]                 The plaintiff pleaded two causes of action. One was misconceived and bound to fail (alleged breach by Mr Claydon of statutory duties as a director under ss 131, 133, 137 and 140 of the Companies Act 1993). The second cause of action alleged oppressive, unfairly discriminatory or unfairly prejudicial conduct under s 174 of the Companies  Act  through  misappropriation  of  INZL’s   business.   I  found  that   Mr Claydon had misappropriated the business of INZL. However, I did not accept the value placed on the business by Tyrion; it asserted a value of $232,000 but I found that the shareholding was worth only $44,425. I then exercised my discretion against granting relief.

[7]                 The defendants seek costs on a 2B basis, uplifted to reflect the plaintiff’s failure to meet timetable obligations and failure to advance a scheduled mediation. They seek indemnity costs in respect of steps taken after 7 February 2018 on the basis that the plaintiff failed to accept a Calderbank offer that expired on that date.

[8]                 The plaintiff challenges some of the aspects of the scale costs claimed and resists any uplift or award of indemnity costs.

[9]As to the specific issues relating to calculation of the scale costs:

(a)the defendants have adjusted their calculation to reflect the correct daily recovery rate for the relevant period;

(b)the plaintiff challenges the claim for individual statements of defence but I accept that the positions of the defendants were different and warranted separate statements of defence;

(c)the defendants have adjusted their calculation for the amount of time to claim for only 3.5 hearing days;

(d)the plaintiff resists the defendants’ claim for second counsel and I agree that second counsel was not justified. It was a straightforward case with a narrow factual scope and a small amount of expert evidence.

[10]              I turn to the question of uplift. It is apparent from the court file that the plaintiff was slow to advance this claim and often in breach of timetable directions. Progress up to the hearing of the preliminary question has already been taken into account in the costs on that application. However, it is also clear that even after the determination of the preliminary question in March 2015 progress was very unsatisfactory. In March 2017, Venning J described it as desultory, with Mr Blomfield not having given the matter the attention that he should have. A fixture for 22 May 2017 was vacated. However, I am not satisfied that there was any significant increase in the cost of the proceeding as a result of this. Nor am I satisfied that I should take into account the facts surrounding the mediation that did not proceed. In my view, the only matter that ought to be taken into account is the Calderbank offer, to which I turn next.

[11]              A party who offers to settle for an amount exceeding the amount of the judgment obtained by the other party is (subject to the court’s discretion) entitled to costs on steps taken after the offer is made.3 The plaintiff resists indemnity costs on the basis that its failure to accept the offer was not unreasonable, given the continued strong assertions by the defendant that there had been no breach of s 174 (proved wrong at trial) and that its quantum evidence was significantly higher than the offer being made.

[12]              It is true that the substantive allegation of wrongdoing against the defendants was upheld. However, it ought to have been clear to the plaintiff that it was significantly at risk on quantum. Objectively, the consistent evidence of both the former accountant for the company and the expert accountant engaged by the

3      Rule 14.11. This rule does not preclude increased or indemnity costs being granted as an alternative under r 14.6.

defendants for the purposes of the trial made for a more rational assessment of the likely value of the company.

[13]              In addition, given the overall circumstances of the case, the plaintiff was always at risk in terms of the discretion, for the reasons set out in my decision. I do not accept the assertion that the defendants succeeded on the basis of unpleaded affirmative defences or was granted an indulgence in this regard.

[14]              This was a case in which neither of the protagonists emerged in a good light. However, there is no good reason to depart from the usual approach that costs should follow the event and that the unreasonable failure to accept a Calderbank offer will expose that party to indemnity costs for subsequent steps.

Result

[15]              On the preliminary determination, there are costs on a 2B basis to the plaintiff, reduced by 10 per cent for the reasons given.

[16]              On the substantive hearing, there are costs to the defendants on a 2B basis up to 7 February 2018, with costs on an indemnity basis thereafter. I leave it to counsel to confer regarding the final calculation.

[17]              As to disbursements, the only outstanding issue is the claim for Mr Campbell’s expert costs. But Mr Campbell was not an expert witness. He was primarily a fact witness. I allow expert costs only in respect of Mr Martin.

P Courtney J