Veronica West Limited v Master Design Furniture Limited

[2025] NZHC 1753

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-1371 [2025] NZHC 1753

UNDER

AND

section 290 of the Companies Act 1993

IN THE MATTER

of an application to set aside a statutory demand

BETWEEN

VERONICA WEST LIMITED

Applicant

AND

MASTER DESIGN FURNITURE LIMITED

Respondent

Hearing:

On the papers

Attendances:

B Prewett for the Applicant

No memorandum for the Respondent

Judgment:

1 July 2025

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

(Costs)

This judgment was delivered by me on 1 July 2025 at 10 am pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Crimson Legal, Auckland

VERONICA WEST LTD v MASTER DESIGN FURNITURE LTD [2025] NZHC 1753 [1 July 2025]

Introduction

[1]    In a judgment dated 11 December 2024, I granted the application  by Veronica West Ltd to set aside the statutory demand served on it by Master Design Furniture Ltd (December 24 Judgment).1 I recorded that as Veronica West had succeeded, it was entitled to costs. I asked the parties to confer and to file memoranda only if costs were unable to be agreed. A memorandum has been filed on behalf of the applicant dated 3 March 2025, but no memorandum on behalf of the respondent.

[2]    I had previously granted an application by Master Design to set aside a statutory demand served on it by Veronica West (December 23 Judgment).2 Following that decision, I awarded Master Design increased costs for steps taken after a letter from counsel for Master Design which referred to Coffee Culture Franchises Limited v Home Straight Park Trustees Limited. In that case the Court considered a similar dispute concerning rent and outgoings payable during the COVID-19 pandemic and held that statutory demands should only be issued where the test for legal liability is already established.3

[3]    Following the December 2024 Judgment but prior to this costs decision, an application to withdraw as solicitor on the record was filed by counsel for the respondent. Those orders were granted by minute dated 21 February 2025, with the orders confirming the new email address for service for Master Design. Counsel for Veronica West records in their 3 March 2025 memorandum that they had sought to confer with Master Design directly following advice that the solicitor on the record would be applying to withdraw but received no response.

[4]    In a further memorandum dated 16 April 2025, counsel for Veronica West confirm that its costs memorandum was served on the respondent’s new address for service. No memorandum as to costs has been filed or served by the respondent. Sufficient time has been allowed so I now determine costs.

1      Veronica West Ltd v Master Design Furniture Ltd [2024] NZHC 3634 (December 24 Judgment).

2      Master Design Furniture Limited v Veronica West Limited [2023] NZHC 3831 (December 23 Judgment).

3      Master Design Furniture Limited v Veronica West Limited [2024] NZHC 1103 at [47] (First Costs Judgment), referring to Coffee Culture Franchises Limited v Home Straight Park Trustees Limited [2021] NZHC 577 at [36].

Costs sought

[5]    Veronica West seeks an order for costs of $22,944, being costs on a 2B basis plus a 50% uplift, plus disbursements of $1,558.81 as set out in the following table:

Relevant costs principles

[6]    The starting point in any costs decision is that costs are at the discretion of the Court.4 Although the discretion is a wide one, it is not unfettered. Rule 14.2 of the High Court Rules 2016 sets out the general principles and includes:

(a)the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds:

4      High Court Rules 2016, r 14.1.

(b)an award of costs should reflect the complexity and significance of the proceeding:

…

(g)so far as possible the determination of costs should be predictable and expeditious.

[7]    Rules 14.3 to 14.5 provide for the categorisation of proceedings, appropriate daily recovery rate and the determination of a reasonable time for each step. These proceedings have previously been categorised as Category 2 but r 14.3(2) permits re-categorisation if there are special reasons.

[8]    Increased costs are provided for in r 14.6. The circumstances in which they may be ordered include where the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or a step in it, including by taking or pursuing an unnecessary step or an argument that lacks merit;5 or failing, without reasonable justification, to admit facts, evidence or accept a legal argument.6

[9]    In Holdfast NZ Ltd v Selleys Pty Ltd, the Court of Appeal confirmed that the correct approach is to uplift from scale so I begin by calculating the appropriate scale costs.7 Where an argument lacked merit and was inherently unlikely to succeed, increased costs apply to all steps.8

Are the costs set out in the schedule appropriately claimed?

[10]   I accept that scale costs are appropriately claimed on a 2B basis and that all items claimed in the schedule above, except the memorandum dated 2 July 2024, are appropriately claimed. That memorandum was a joint memorandum prepared by counsel for the respondent. Although some time would have been spent considering and signing the joint memorandum, it is a relatively short timetabling memorandum that does not justify costs for the applicant.

5      Rule 14.6(3)(ii).

6      Rule 14.6(3)(iii).

7      Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA).

8      NR v MR [2014] NZCA 623, (2014) 22 PRNZ 636; and Broadspectrum (New Zealand) Ltd v Nathan [2017] NZCA 434, (2017) 15 NZELR 398 at [57].

[11]   In the costs judgment following the December 23 Judgment, I awarded costs for the reply affidavits on the same basis as now claimed.9 To be fair, I therefore award costs for the reply affidavit here.

[12]   On this basis, the total costs on a  2B basis,  excluding the memorandum  of  2 July 2024, are $14,340.

Should increased costs be awarded?

[13]   Increased costs with an uplift of  at  least  50 per cent are sought  pursuant  to r 14.3(b)(ii) and (iii) of the High Court Rules on the basis that Master Design took or pursued unnecessary steps and arguments that lack merit and failed without reasonable justification to admit legal arguments.

[14]   Veronica West submits that Master Design’s statutory demand was set aside because, as the judgment confirms, Veronica West has a reasonably arguable counterclaim that exceeds the sum demanded by more than the prescribed sum.10 Veronica West submits that the conclusion reached in the December 24 Judgment was inevitable and obvious from the outset for the following reasons:

(a)The existence of Veronica West’s counterclaim  was  known  to Master Design prior to issuing its statutory demand: Veronica West’s counterclaim for rent and outgoings, was the subject of its earlier statutory demand, as well as the application by Master Design to set aside that statutory demand.11

(b)It was, or should have been, obvious to Master Design prior to issuing its statutory demand that Veronica West’s counterclaim was reasonably arguable, in the sense that it had a real evidential basis and was arguable as a matter of law:12

9      Master Design Furniture Limited v Veronica West Limited, above n 3, at [30].

10 December 24 Judgment, above n 1, at [18].

11     December 23 Judgment, above n 2.

12     December 24 Judgment, above n 1, at [7]–[9].

(i)As was accepted in the December 24 Judgment, the question that was addressed in Master Design’s earlier application to set aside Veronica West’s statutory demand — “whether any part of the statutory demand was undisputed” — was very different to that  which  arose   in   the   Judgment:   “whether   in   terms of s 290(4)(b) there is an evidential basis for Veronica West’s counterclaim to at least the amount of the statutory demand plus the prescribed amount and whether the counterclaim is arguable as a matter of law”.13 That is, Veronica West’s counterclaim was to be assessed by reference to a much lower standard.

(ii)The answer to that question was, obviously, yes. This was sufficiently obvious that Master Design did not seriously question whether Veronica West’s counterclaim was reasonably arguable. The issues raised by Master Design — “whether Master Design could ‘fully operate’ its business during the relevant period and what is a “fair reduction’ of rent and outgoings” — were “disputed” and, as accepted in the December 24 Judgment, “neither of these questions can be answered in the context of an application to set aside a statutory demand”.14 As the December 24 Judgment records, that conclusion appeared to have been conceded by counsel for Master Design during the hearing.15

(c)Master Design’s secondary argument — that it had its own “counter-counterclaims”, which exceeded Veronica West’s counterclaim —  was  also  rejected,  because  it  was  irrelevant.16 The question under s 290(4) is “whether the amount demanded is disputed... or whether [Veronica West] has a counterclaim for more than the    amount    of    the   statutory   demand”.17  Master Design’s

13 December 24 Judgment, above n 1, at [7].

14 At [14].

15 At [17].

16 At [22].

17 At [22].

“counter-counterclaims” were “not the subject of the statutory demand

… and so are  not relevant to that issue”.18  Given the clear words of   s 290(4), that conclusion was inevitable and should have been obvious.

[15]   In short, Veronica West submits that it was unreasonable for Master Design to issue its statutory demand, requiring Veronica West’s application to set aside, for reasons that were known and ought to have been obvious to Master Design at the time, so that increased costs ought to be awarded for all steps in this proceeding.

[16]   I accept that increased costs are appropriate in this case as it ought to have been clear to Master Design from the December 23 Judgment that Veronica West had an arguable claim for unpaid rent. That claim had not been resolved by the time Master Design issued its statutory demand and I had held in the December 23 Judgment that the position between the parties in terms of unpaid rent and outgoings, and the extent to which either or both ought to be abated, could not be determined in the context of an application to set aside, and instead needed to be determined by agreement or arbitration.19

[17]In the circumstances, I therefore award increased costs.

[18]   In terms of the steps for which increased costs should be awarded, counsel for Veronica West does not confirm that the costs sought are less than actual costs. In circumstances where the application was essentially the reverse of the earlier application, I am concerned that a 50 per cent uplift for all steps may approach indemnity costs. Rather than require a further memorandum to be filed, I consider that increased costs should not be awarded for the preparation of the bundle as this would have been relatively simple. This adjustment will help ensure that costs awarded are not on an indemnity basis.

[19]   Adding a 50 per cent uplift to the steps, other than item 41, the preparation of the bundle, amounts to an uplift of $6,453 for a total costs award of $20,793. I therefore make this award below.

18 December 24 Judgment, above n 1, at [22].

19 At [17].

Disbursements

[20]   The disbursements included in the schedule are appropriately claimed except that they have been claimed inclusive of GST. Disbursements ought to exclude GST as Veronica West is presumably GST registered and will be able to claim a credit for the GST incurred.20 I therefore reduce the claim for disbursements by the amount of the GST included to $1,355.49.

Result

[21]    The respondent is to pay costs to the applicant on a 2B basis with a 50 per cent uplift for items 37, 39, 40 and 42 amounting to $20,793, together with disbursements of $1,355.49, for a total of $22,148.49.

Associate Judge Sussock

20     New Zealand Venue and Event Management Limited v Worldwide NZ LLC [2016] NZCA 282 at [12].