Walker v Angus

[2019] NZHC 2845

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2017-409-933

[2019] NZHC 2845

UNDER

Companies Act 1993, s 266

IN THE MATTER OF

the liquidations of Te Anau Ventures Limited and Tay Properies Limited

BETWEEN

ROBERT WALKER

Applicant

AND

GEOFFREY DAVID ANGUS

First Respondent

DESMOND JOHN KNOWLES
Second Respondent

DAVID RONALD KITSON
Third Respondent

GRANT SMITH

Fourth Respondent

Hearing:

On the Papers

Counsel:

G Slevin for Applicant

J B Lill for First and Second Respondent G Hair for Third Respondent

D Ballantyne for Fourth Respondent

Judgment:

4 November 2019

JUDGMENT OF MANDER J

This judgment was delivered by me on 4 November 2019 at 2.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:     .

WALKER v ANGUS [2019] NZHC 2845 [4 November 2019]

Introduction

[1]    In my decision of 7 September 2018, I directed the first three respondents to produce a number of documents  sought by the applicant, Mr Walker,  pursuant to    ss 261 and 266 of the Companies Act 1993. A decision in respect of the fourth respondent, Mr Smith, was reserved. Mr Smith now claims costs against Mr Walker on a 2B basis.

Background

[2]    Mr Walker sought documents from the four respondents on the basis they were necessary to enable him to meet his duties as liquidator of two companies, Te Anau Ventures Ltd and Tay Properties Ltd. I granted orders against the first three respondents, although in different terms to those sought by Mr Walker.

[3]    The application seeking orders against Mr Smith was reserved. There were aspects of the application against Mr Smith that required separate consideration, primarily that even if the documents were in Mr Smith’s possession, they would have been held in his capacity as a solicitor for his firm’s client, FTG Securities Ltd (FTG). FTG was not a respondent to the application and was not before the Court. I considered that it was not necessary to determine the issues in relation to Mr Smith at that stage because the documents sought from him could be obtained in the first instance from the first two respondents.

[4]    I took the preliminary view that costs should lie where they fall, but formally reserved the question. Mr Smith advises that he has since been informed that the first three respondents have complied with the orders and that Mr Walker has not taken any steps to revisit the application. He therefore seeks costs against Mr Walker.

Mr Smith’s application for costs

[5]    Mr Smith seeks costs on a 2B basis in the sum of $12,935. He submits that Mr Walker was unsuccessful in his application against him and that costs should

follow the event in the ordinary way.1 He contends that costs on a scale 2B basis are appropriate given the proceeding was of average complexity and required an average amount of time, skill and experience.

[6]    Mr Smith maintains that he could justifiably have sought indemnity or increased costs because he was essentially a third party to the proceeding who had received no notice of the application or request under s 161 of the Act. He notes that Mr Walker delayed his application for a number of years, and its merits, he says, were questionable. Mr Smith submits that he was obliged to raise the objections he did on behalf of his firm in accordance with his obligations to his client, and that Mr Walker failed unreasonably to accept Mr Smith’s argument until after Mr Smith had already incurred his costs. Nevertheless, he only seeks 2B costs from Mr Walker.

Mr Walker’s opposition

[7]    In response, Mr Walker argues that my preliminary view that costs should lie where they fall was correct. He says it was necessary to join Mr Smith because the third respondent had informed him that all of the documents he sought had been provided to Mr Smith. It is also claimed that it was necessary that Mr Walker seek orders against Mr Smith personally rather than against FTG or his firm, because the relevant section only allowed orders to be sought against “a person”.2

[8]    Mr Smith disputes the correctness of this submission. He notes the observation of Associate Judge Osborne in The Commissioner of Inland Revenue v Property Ventures Ltd (in liquidation and in receivership), that the term “any other person” as used in s 261(1) of the Companies Act is to be interpreted consistently with s 29 of the Interpretation Act 1999, and includes both incorporated and unincorporated bodies.3

[9]    It is not necessary for me to determine that contest for the purposes of the costs application, although I do note that the Associate Judge in that case considered that the liquidator would have been entitled to issue a s 261 notice against individual police

1      High Court Rules 2016, r 14.2(1)(a).

2      Companies Act 1993, s 261.

3      The Commissioner of Inland Revenue v Property Ventures Ltd (in liquidation and in receivership)

[2013] NZHC 1368 at [38].

officers who held particular documents. That has parallels with the course taken in the present case, although it remains open whether that was the liquidator’s only option.

[10]   Mr Walker contends that the relevant submissions made on Mr Smith’s behalf were only filed at 4.47 pm on Friday 27 June 2018. This did not allow counsel the opportunity to fully consider and respond to those arguments at the hearing on Tuesday 3 July 2018. He submits that had Mr Smith raised these issues earlier in his notice of opposition, Mr Walker may have approached the proceeding differently in regard to Mr Smith. Indeed, Mr Smith may not have been required to prepare for and attend the hearing at all.

[11]   Finally, Mr Walker maintains that, as between himself and Mr Smith, he was largely the successful party. The grounds raised in Mr Smith’s notice of opposition were found predominantly in Mr Walker’s favour, as they were in regard to all four respondents. The issues raised in Mr Smith’s later affidavit of 27 June were not able to be determined at trial, and therefore it is argued cannot be said to have been determined in his favour. For these reasons Mr Walker submits that costs should lie where they fall.

Relevant principles

[12]   The approach to be taken to the question of costs is well understood. The overriding principle is that costs are at the discretion of the Court.4 Rule 14.2 of the High Court Rules 2016 sets out general guiding principles to be applied in the exercise of this discretion. These include that the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds, and that so far as possible the determination of costs should be predictable and expeditious.

4      High Court Rules 2016, r 14.1.

[13]   It is a matter of common sense as to which party has succeeded in a proceeding.5 It requires consideration of which party won the primary contests of law or fact.6 In Fog v Frimley Estate Ltd it was noted that:7

The extent to which a litigant has succeeded must be viewed as a matter of substance, not form. It must be viewed through a realist's lens in “determining who in reality has been the successful party”.

[14]   This Court, in Lawrence v Glynbrook 2001 Ltd, explained the approach as follows:8

… an assessment of which party was ‘successful’ requires both a consideration of which party won the principal contests of law and fact and a realistic appraisal of the end result, rather than focussing on who initiated what step and the extent to which that step succeeded or failed.

Discussion

[15]   The grounds of opposition raised in Mr Smith’s notice of opposition were as follows:

(a)the categories of documents being sought from him were too broad;

(b)the majority of the documents were not in his possession;

(c)the applicant already had access to a number of the documents; and

(d)the applicant had not previously requested the documents from Mr Smith.

[16]   My determinations in regard  to  each  of  these  grounds  were  largely  in  Mr Walker’s favour. The findings applied equally to Mr Smith as to the other three respondents, against whom orders were made. Mr Walker could not be said to have been unsuccessful in respect of these grounds.

5      Bank of Credit and Commerce International SA v Ali (No 4) [1999] 149 NLJ 1734.

6      Phoenix Organics Ltd v RD2 International Ltd (No 2) HC Auckland CIV-2005-404-5070, 21 December 2015.

7      Fog v Frimley Estate Ltd (No 2) [2016] NZHC 314 at [3].

8      Lawrence v Glynbrook 2001 Ltd [2015] NZHC 1005 at [8].

[17]   However, I reserved the position in respect of Mr Smith due to the further ground of opposition that the documents were held by Mr Smith in his capacity as solicitor for a third party. That ground was not raised by Mr Smith in his notice of opposition or the accompanying affidavit. The first time the issue was raised was in Mr Smith’s affidavit of 27 June  2018,  two  working  days  prior  to  the  hearing.  Mr Walker says that, had that ground been raised earlier, he may have approached his application in respect of Mr Smith differently, and that Mr Smith may not have been required to attend the hearing. Because of the stance taken by counsel for Mr Walker at the hearing, I accept that may be the case.

[18]   Furthermore, I am not satisfied that my decision to reserve the position relating to Mr Smith in light of the new ground of opposition is to be equated to Mr Smith having successfully resisted Mr Walker’s application. That issue was not determined in either party’s favour once it became apparent that the documents sought from    Mr Smith could still be accessed through the first two respondents and that Mr Walker was content to follow that course in the first instance. Mr Smith’s argument, which was raised late in the piece, resulted in a reserving of the position. I do not consider in the circumstances that outcome is to be construed as Mr Smith having succeeded against Mr Walker.

[19]   Nor, do I accept Mr Smith’s arguments in relation to indemnity or increased costs. I consider it was reasonable for Mr Walker to pursue orders against him based on the advice he had received from another of the respondents and the merits of the initial grounds upon which the application was resisted.   Mr Smith is  critical of    Mr Walker simply relying on the representations of the other respondent and not directly enquiring from him whether he had received the documents in question. However, that argument does not materially advance the position. It can safely be presumed that any such enquiry would have been met with the same response outlined in the notice of opposition that only went so far as to suggest the majority of the documents were not in Mr Smith’s possession. Any such enquiry by Mr Walker at that stage would not have resolved the position between those two parties – indeed, the issue as between Mr Smith and Mr Walker remains reserved.

[20]   The overall merits of Mr Walker’s application were largely sound given he was successful in obtaining orders for most of the documents despite arguments made in opposition in which Mr Smith joined. Mr Smith argues that Mr Walker failed, without reasonable excuse, to accept his arguments until after he had incurred his costs. However, as already noted, Mr Smith did not raise the issue warranting the position being reserved until very shortly before the hearing. I do not consider it was unreasonable for Mr Walker’s counsel to have only acknowledged the potential substance of that issue at the hearing.

[21]   Mr Smith argues that whatever the merits of the unresolved issue the fact remains that Mr Walker’s application against him was ultimately unsuccessful and that costs should follow as a result. However, whether Mr Walker would have been successful had he pressed his application remains moot. I accept that ordinarily where an application is not pursued the other party is entitled to claim its costs but, in the circumstances of the present case, it was only the belated grounds put forward by Mr Smith, effectively on the eve of the hearing, that gave Mr Walker cause to pause.

Result

[22]   Taking  all these considerations into account, I consider costs as between    Mr Smith and Mr Walker, as with the other parties, should lie where they fall. The application by Mr Smith for costs against Mr Walker is declined.

Solicitors:

Maude & Miller, Wellington Chapman Tripp, Christchurch Malley & Co, Christchurch

Canterbury Legal, Christchurch