Waimauri Limited v Mahon

[2023] NZHC 719

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-1218

[2023] NZHC 719

UNDER

the Insolvency Act 2006

IN THE MATTER OF

the bankruptcy of NEVILLE CHRISTOPHER MAHON

BETWEEN

WAIMAURI LIMITED

Plaintiff

AND

NEVILLE CHRISTOPHER MAHON

Defendant

Hearing:	On the papers
Appearances:	David Chisholm KC and Michael Lenihan for the Plaintiff R B Hucker for the Defendant
Judgment:	4 April 2023

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 4 April 2023 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

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

Solicitors:

Brown Partners Lawyers (John Brown), Auckland, for the Plaintiff Hucker & Associates (R B Hucker), Auckland, for the Defendant

Copy for:

David Chisholm KC / Michael Lenihan, Auckland

WAIMAURI LIMITED v MAHON [2023] NZHC 719 [4 April 2023]

Introduction

[1]    On 11 July 2022 the Court delivered a judgment (the  Judgment) granting  Mr Neville Mahon (Mr Mahon), the judgment debtor, his application to halt a bankruptcy adjudication brought by Waimauri Limited (Waimauri), the judgment creditor, pursuant to s 38 of the Insolvency Act 2006. Under the Judgment the bankruptcy adjudication was halted on condition that Mr Mahon provide security for the judgment debt to Waimauri. The security was to be provided by Mr Mahon to Waimauri within 14 days of the date of the Judgment (at [97](b)).

[2]Following the issue of the Judgment, the following occurred:

(a)Counsel for Mr Mahon issued a memorandum as to costs, dated 22 July 2022, seeking an order for costs on a 2B basis in favour of Mr Mahon;

(b)counsel for Waimauri  filed a memorandum as to costs in reply to    Mr Mahon’s memorandum dated 26 July 2022, opposing an order for costs in favour of Mr Mahon and seeking costs be awarded in favour of Waimauri;

(c)counsel for Waimauri filed a further memorandum as to costs dated  17 October 2022, updating Waimauri’s position as to costs since the issue of the Judgment on 11 July 2022.

[3]There are two matters to be determined in this costs Judgment:

(a)Costs up to the date of the Judgment 11 July 2022;

(b)Costs in respect of events following the Judgment in relation to granting of security by Mr Mahon.

Costs in relation to the judgment of 11 July 2022

Mr Mahon’s submissions

[4]    Mr Hucker, on behalf of Mr Mahon, in summary, made the following submissions in support of the application for 2B costs to be awarded to Mr Mahon:

(a)Mr Mahon, in obtaining an order in the bankruptcy, albeit subject to a condition, was the successful party for the purposes of r 14.2(1)(a), and there are no grounds to reduce the award of costs under r 14.7;

(b)Making an order on condition of the payment of security ought not to lead to a reduction of costs. The portion of the hearing and evidence relating to the issue of security was de minimis.

(c)Waimauri was unsuccessful in resisting the fundamental terms of the basis on which security was to be provided.

(d)The halt application was part of the initial halt application heard by Associate Judge Sussock and at [78] of her Honour’s judgment she recorded that although a halt could be considered an indulgence, the opposition to a halt application could be withdrawn at any time by Waimauri and she noted that the separate and distinct jurisdiction was conferred by the jurisdiction to halt under the Insolvency Act 2006. On that basis, costs were considered appropriate.

(e)Treating the successful halt application as an indulgence pre-supposes that the creditor is entitled to an order for adjudication as of right, and there are no other considerations as to whether an adjudication order should be made. The scheme of s 37 of the Insolvency Act 2006 only confers jurisdiction for the Court to consider whether an adjudication order should be made. The decision whether or not to adjudicate involves the exercise of judicial discretion.

(f)A successful halt application ought to be treated in similar terms to a successful interim injunction. The halt application is the equivalent of the Companies Act jurisdiction of a stay and restraint application under r 31.11(2) of the High Court Rules which records that such an application is to be treated as an application for an interim injunction. The successful party in the interim injunction context is the party that succeeds in obtaining the injunction order even if in terms different to that in the application. It is not an indulgence.

Waimauri’s submissions

[5]    Mr Chisholm KC, on behalf of Waimauri, submits that Mr Mahon was granted an indulgence in the Judgment by being granted a conditional halt to the bankruptcy proceedings and in such circumstances costs would normally either be awarded in favour of the other party or lie where they fall. Mr Chisholm submits that in particular facts, and in particular given Mr Mahon’s failures to meet the required condition of the stay within 14 days, costs should be awarded in favour of Waimauri.

[6]    Mr Chisholm submits that one of the exceptions to the general principle that costs follow the event is where a successful party has been granted an indulgence. He refers to McGechan on Procedure:1

Conventionally, the grant of an indulgence to a party is at the expense of a costs award against that party.

[7]    Mr Chisholm then makes reference to authority cited for that proposition being Cunningham v Butterfield2 which, he submits, accepted that the judgment in Holdgate v Holdgate3 stood for the proposition that a grant of an indulgence to a party is conventionally made at the expenses of a costs award against that party obtaining the indulgence.

1      McGechan on Procedure: online edition at 14.2.01(c).

2      Cunningham v Butterfield (2014) 22 PRNZ 521 at [52].

3      Holdgate v Holdgate (Unreported), HC Auckland, CP303/96, 24 September 1996.

[8]    Mr Chisholm referred further to situations where costs were allowed to lie where they fall, such as decisions in Land Trust Limited v WAM Property Limited,4 in which an order that costs should lie where they fall on appeal because, even though the appellants succeeded, they had been granted an indulgence and costs were not appropriate. He also refers to the decision in Mainzeal v Yan5 where costs were not pursued after an unconditional halt was granted prior to an appeal after Associate Judge Andrew recorded his view that there should be no order as to costs.

[9]    Finally, Mr Chisholm refers to Sandfield Associates Ltd v Monnery6 where an unconditional halt was granted pending the hearing of a High Court proceeding, and costs were ordered to lie where they fall.

[10]   Mr Chisholm responds to the various arguments put forward by Mr Mahon as follows:

(a)An application by Mr Mahon for a halt when all appeal rights had been exhausted was plainly an indulgence by the Court.

(b)The submission that the second halt application was a continuation of the first halt application before Associate Judge Sussock was clearly wrong as was the fact that the halt was now granted conditionally only, and circumstances have changed materially against Mr Mahon since the first halt application as his appeal has been dismissed.

(c)The argument put forward by Mr Mahon that the halt application should, for costs purposes, be equated with an injunction is untenable and unsupported by authority, and the analogy of an application to stay a liquidation of a company under r 31.11 situation, is wrong as the obvious difference is that in the case of a halt application the judgment debtor has already a judgment against him or her. This is distinct from a company liquidation application where there is only an unremedied

4      Land Trust Limited v WAM Property Limited [2019] NZCA 573.

5      Mainzeal v Yan [2020] NZHC 1659 at [48].

6      Sandfield Associates Ltd v Monnery [2021] NZHC 2908 at [19].

expired statutory demand which raises a presumption of insolvency against the company.

[11]   Mr Chisholm rejects, for the reason set out at [3-5])(a) to (f) of his submissions, the proposal by Mr Mahon that the letter from Mr Macrae was the reason why he was substantially successful in the halt application.

Conclusion in relation to costs up to the date of Judgment

[12]   In my view, costs up to the date of Judgment should lie where they fall. Considering a balance between the submissions made on behalf of Mr Mahon and those made on behalf of Waimauri, this is an equitable result. I accept Mr Mahon’s submission that his application to halt the bankruptcy was successful and there was an exercise of discretion in Mr Mahon’s favour by the Court under s 38 of the Insolvency Act 2006. However, there is an element of indulgence being granted by the Court as the halt was only granted on the condition of Mr Mahon providing security. In the light of the authorities referred to at [7] to [9] above, in these circumstances an order that costs lie where they fall is appropriate.

Costs since the Judgment

[13]   Mr Chisholm, in his memorandum dated 17 October 2022, seeks a costs order against Mr Mahon in respect of matters since the date of the Judgment. Mr Chisholm submits an order for costs against Mr Mahon is justified on the following grounds:

(a)Mr Mahon’s failure or refusal to engage in respect of the form of security and to give security within 14 days as required by [97](b) of the Judgment. He  submits  Waimauri  had  sought  to  engage  with Mr Mahon from 12 July 2002and had confirmed on that date that it would accept an undertaking.

(b)Mr Mahon’s initial insistence that a form of guarantee be offered as security rather than an undertaking, despite this requiring further

negotiation and potentially a further proceeding by Waimauri to enforce the guarantee if Mr McCrae failed to pay.

(c)The need to prepare written submissions dated 14 September 2022 and to argue the issue of the form of security (undertaking versus guarantee) on 19 September 2022 as contemplated  by the Court’s minute dated  3 August 2022.

(d)Attempts to agree a form of undertaking after receipt of Mr Mahon’s counsel’s memorandum dated 29 September 2022  that  confirmed  Mr McCrae would in fact grant an undertaking to the Court.

[14]   Mr Chisholm submits that Mr Mahon has taken an unreasonable position on security, particularly given the security should necessarily be as close to a payment into Court as possible.  Mr Chisholm then points to the various positions taken by  Mr Mahon including initially refusing to offer or engage on an undertaking to the Court, seeking to limit the quantum of the undertaking to $1.25 million (rather than security for the full judgment debt), seeking to make the proposed undertaking void if Mr Mahon subsequently went bankrupt, and seeking to make the undertaking void if Waimauri’s appeal was successful, as demonstrating an unrealistic position being taken by Mr Mahon causing Waimauri wasted costs since 11 July 2022.

Conclusion in relation to costs since the Judgment

[15]   I am of the view that an order for costs should be made against Mr Mahon in relation to costs incurred by Waimauri since the Judgment. Ultimately the security given by Mr Mahon for the judgment debt was substantially the security Waimauri had been asking for as an undertaking to the Court, the form of which was similar to the form requested by Waimauri.

[16]   Accordingly an order is made in favour of Waimauri, being the costs as sought at [7] of Mr Chisholm’s memorandum of 17 October 2022, totalling $11,472.00.

…………………………….. Associate Judge Taylor