Vegar v Aorangi Forests Ltd

[2014] NZHC 2910

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-3163 and 3166 [2014] NZHC 2910

IN THE MATTER

of a proposal by Peter Thomas Vegar and a

proposal by Helen Jean Vegar under the
Insolvency Act 2006

BETWEEN

PETER THOMAS VEGAR First Insolvent

HELEN JEAN VEGAR Second Insolvent

AND

AORANGI FORESTS LTD & ORS Creditors

CIV-2013-404-3685

IN THE MATTER             of an appeal under Regulation 32(1) of the Insolvency (Personal Insolvency) Regulations 2007

BETWEEN  ANTHONY JOHN EBERT AND JENNIFER JANE EBERT Appellants

ANDPETER THOMAS VEGAR Respondent

CIV-2013-470-536

IN THE MATTER             of an appeal under Regulation 32(1) of the Insolvency (Personal Insolvency) Regulations 2007

BETWEEN  HILLERSDEN VINEYARD CONTRACTING LTD (IN LIQUIDATION)

Appellant

ANDPETER THOMAS VEGAR AND HELEN JEAN VEGAR

Respondents

PETER THOMAS VEGAR v AORANGI FORESTS LTD & ORS [2014] NZHC 2910 [21 November 2014]

Hearing:	(On the papers)
Counsel:	RB Stewart QC for Provisional Trustee KW Fulton for Mr and Mrs Vegar SP Bryers for Trustees of Florence Trust JK Boparoy for Hillersden Vineyard
Judgment:	21 November 2014

JUDGMENT OF BREWER J [Costs]

This judgment was delivered by me on 21 November 2014 at 12 noon pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Kevin McDonald & Associates (Takapuna) for the Provisional Trustee

Craig Griffin & Lord (Auckland) for Mr and Mrs Vegar

Gaines Law (Blenheim) for Trustees of the Florence Trust

Waterstone Insolvency (North Shore City) for Hillersden Vineyard

Introduction

[1]      Hillersden Vineyard Contracting Ltd (in liquidation) (“Hillersden”) and the Florence Trust failed in appeals against the Provisional Trustee’s decision to reject their votes against creditors’ proposals.1    Subsequently, Hillersden and the Florence Trust withdrew their opposition to the proposals, which I then approved.2

[2]      The Provisional Trustee, Mr Brown, and the insolvent proposers, Mr and

Mrs Vegar, seek costs.

Issues

[3]      Should Mr Brown  be awarded  costs against Hillersden and the Florence

Trust:

(a)       for the withdrawn oppositions to the proposals; and/or

(b)      for the failed appeals?

[4]      Should  Mr  and  Mrs  Vegar  be  awarded  costs  against  Hillersden  and  the

Florence Trust:

(a)       for the withdrawn oppositions to the proposals; and/or

(b)      for the failed appeals?

Discussion

[5]      The usual rule is that costs follow the result.   If two successful parties are related, such that one counsel could well appear for both, but for some unjustified reason separate counsel are employed, costs may be modified to avoid imposing a

double burden.

1      Vegar v Aorangi Forests Ltd & Ors [2014] NZHC 1109.

2      Vegar v Aorangi Forests Ltd & Ors HC Auckland CIV-2013-404-3163, 3 June 2014 (Minute).

[6]      The  award  of  costs  where  a  creditor  unsuccessfully opposes  a  creditors’ proposal can be on a different basis.   This Court has held3  consistently that the burden of the costs of a Provisional Trustee falls on the proposing debtor;4 and where a creditor unsuccessfully opposes a creditors’ proposal, costs lie where they fall.5

[7]      The reason for the different approach is that a creditor who successfully opposes a creditors’ proposal gets nothing in costs.  That is because the debtor, who is insolvent, becomes bankrupt.  If there is an award of costs it will have no priority in the bankruptcy.   Since a Provisional Trustee has no choice but to present an application to the Court for approval, costs will not usually be awarded against the

trustee.   In this case, as is commonplace, the creditors’ proposal6  provides for the

Provisional Trustee’s fees and expenses to be paid by Mr and Mrs Vegar.

[8]      Of course, the award of costs is discretionary and the practice I have outlined is not invariably observed.  For example, costs will be awarded against a trustee if the trustee is guilty of misconduct.  McGechan on Procedure cites the example of a trustee  who  abuses  the  duty  to  act  objectively  and  even-handedly  in  creditors’

interests, perhaps by improperly rejecting a creditor’s proof of debt.7   Equally, costs

will be awarded against a creditor who acts unreasonably – for example, through excessive delay in mounting their opposition or by acting vexatiously or maliciously.

[9]      In this case, I find neither Hillersden nor the Florence Trust did anything in relation to opposing the creditors’ proposal which would trigger a change to the usual costs situation.  I accept that the opposition, particularly by the Florence Trust, required significant work to be done – including the obtaining of expert evidence.

But that is not enough to warrant a departure from the current practice.

3      Re Meltzer, ex parte Parker Street Holdings HC Auckland CIV-2010-404-8293, 28 July 2011 at

[9]-[10].  See also Associate Judge Bell’s discussion in Re Simpkin HC Whangarei CIV-2010-
488-778, 21 March 2011 at [28]-[29] and Wang v Meltzer HC Auckland CIV-2010-404-3177,
5 August 2011; Liddle’s Proposal HC Auckland CIV-2009-404-5377, 25 June 2010; Re Farmer
HC Auckland B812/90, 1 October 1991; Re New Zealand Guardian Trust HC Auckland CIV-

2009-404-579, 18 December 2009.

4      Andrew Beck and others McGechan on Procedure (looseleaf ed, Brookers,) at [HRPt 14.14A (b)].

5      At [HRPt 14.14A(d)].

6      At para 16.

7      At [HRPt 14.14A(c)].

Costs on the proposal

[10]     I am advised by counsel for Mr and Mrs Vegar and Mr Brown8  that costs regarding the opposition to the proposal are agreed with Hillersden.  I am invited to make an order accordingly.  In this instance, I take the view that if costs have been agreed then they will be paid in accordance with the agreement.  I decline to make an order.

[11]     So far as costs claimed against the Florence Trust in relation to the Trust’s

opposition to the proposal are concerned, I order that costs will lie where they fall.

Costs on the appeals

[12]     I do not accept that the appeals should be treated in the same way. An appeal by a creditor against a decision by a Provisional Trustee stands to one side of the proposal and approval process.  For instance, an appeal can be lodged by a creditor who supports the proposal.  In this case, in addition to opposing the approval of the proposal, Hillersden and the Florence Trust attempted to pre-empt the situation by challenging the decisions of the Provisional Trustee which led to the proposal being endorsed by the necessary majorities of creditors in the first place.   This was a separate proceeding.

[13]     In effect, I held that Hillersden and the Florence Trust did not have standing

to vote at the creditors’ meeting.

[14]     Under these circumstances, I see no reason why costs should not follow the event.

[15]     I have read the memoranda filed on behalf of the parties, and I note that

Hillersden accepts Mr and Mrs Vegar’s claim.

[16]     I am persuaded by the arguments as to calculation of costs on the appeals set

out in Mr Fulton’s memorandum of 25 June 2014.  I find that proper allowance has

been  made  for  the  overlap  between  the  cases  presented  on  behalf  of  Mr  and

8      In an email to the Court on 17 July 2014, Ms Boparoy for Hillersden confirms that agreement.

Mrs Vegar, on the one hand, and Mr Brown, on the other.  I find that Mr Brown has properly recognised that costs for his involvement should be modest.

[17]     I note counsel for Florence Trust’s submission as to reduction of quantum claimed on behalf of Mr Brown.  But, again, I accept Mr Fulton’s submission as to overall reasonableness.  In the exercise of my discretion, I will not further reduce the costs.

[18]     I make the following orders in relation to costs on the appeals:

(a)       Hillersden  is  to  pay costs  to  Mr  and  Mrs Vegar  of  $10,149  plus disbursements of $261.45;

(b)      Hillersden is to pay costs to Mr Brown of $5,671;

(c)       Mr and Mrs Ebert, as trustees of the Florence Trust, are to pay costs to

Mr and Mrs Vegar of $10,646 plus disbursements of $261.45;

(d)      Mr and Mrs Ebert, as trustees of the Florence Trust, are to pay costs to

Mr Brown of $5,920.

Brewer J