Water Treatment Products Limited (In liquidation) v Falloon

[2012] NZHC 1141

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2010-470-625 [2012] NZHC 1141

UNDER  The Companies Act 1993

IN THE MATTER OF     an application under Section 301 of the

Companies Act

BETWEEN  WATER TREATMENT PRODUCTS LIMITED (IN LIQUIDATION) Plaintiff

ANDMURRAY JAMES FALLOON Defendant

Hearing:         (on papers)

Appearances: Mr King for plaintiff (on papers)

Mr G Brittain for defendant (on papers) Judgment:     25 May 2012

JUDGMENT OF ASSOCIATE JUDGE DOOGUE [Stay application]

This judgment was delivered by me on

25.05.12 at 3 pm, pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

Dennis King Law, P O Box 1092, New Plymouth – by email: [email protected]

Mr G Brittain, Barrister, P O Box 13-473, Tauranga – by email: [email protected]

WATER TREATMENT PRODUCTS LIMITED (IN LIQUIDATION) V FALLOON HC TAU CIV-2010-470-625 [25 May 2012]

[1]      This proceeding is in the Chambers List for hearing on Friday 25 May 2012. The issue that will be under consideration if the Chambers hearing goes ahead is the question of unpaid costs which the defendant was directed to pay by a judgment of this Court dated 21 October 2011.  The defendant/applicant was awarded costs on a

2B basis.   Those costs total $3,674.20.   They have not been paid.   There is no argument about the matters that I have just set out.

[2]      The defendant now seeks an order staying the proceeding because the party and party costs have not been paid.  Mr Brittain for the defendant has referred me to a judgment of Cooper J in the proceeding Kidd v Van Heeren[1].   In that case, His Honour  in  reliance  on  (then)  r 258  found  that  proceedings  could  be  stayed  in circumstances where costs orders had not been paid.  He has also referred to other authorities where the same approach was taken.

[1] Kidd v Van Heeren, Auckland HC, CIV-2004-404-652, 16 November 2006.

[3]      I am in no doubt that there is jurisdiction to make the type of order which the defendant seeks in this case.

[4]      The next issue concerns whether as a matter of discretion the Court ought not to make the order.

[5]      Mr King in his memorandum has referred to the fact that the litigation in this case has been funded by grants from the Liquidation Surplus Account and that there can be no certainty that the fund would be prepared to provide the amount required to meet the costs order in this case.  Mr King says that if the Liquidation Surplus Account did not assist then the amount would not be able to be paid.  This would be a hardship to the plaintiff, he submits.

[6]      Mr King says there have been failures on the part of the defendant to provide access to electronic data other than on the stipulated basis that the plaintiff is to pay the costs that are going to be incurred in accessing that data, the password apparently having been lost.   Mr King says that the defendant has no right to insist upon payment of that amount as a condition of discovery being given and he ties the shortcomings of the defendant’s conduct, as he views them, into the question of the

discretion to order a stay.

[7]      My brief reasons for granting a stay are these.  First, the order for costs was made in October of last year.  Where a Court makes an interlocutory order for costs without also giving directions at the point at which the order is to take effect is deferred, then the opposite party is entitled treat it as imposing an immediate obligation.  The obligation to pay costs came into effect some six or seven months ago.

[8]      Mr King says making an order for stay could spell the end of the litigation and that that would be unjust to the plaintiff.   I accept that it would be a blow for the plaintiff if a stay were ordered.  On the other hand, in the circumstances of this case it has to be appreciated that the defendant is a litigant in person who has no doubt had to pay his lawyers for the costs of the litigation generally and for the application for security for costs which was dealt with last year.  The Court has determined that the plaintiff should make a contribution to the costs that the defendant has undoubtedly had to pay.   Unless payment is made to the defendant in accordance with the Court order, he will continue, in effect, to have to carry the costs of that application without having the benefit of the contribution that the Court ordered. This too is unfair.

[9]      On the other hand,  I accept that  the  defendant  has had the benefit of a security for costs order with regard to other aspects of the costs in the case which provide him with a measure of protection in regard to those costs.  The Court has to take a balanced approach on these matters.

[10]     I also consider it relevant that in this case the costs which have been incurred by the defendant have no doubt been exacerbated by the unsatisfactory history on the part of the plaintiff in dealing with this case.  I commented on those matters in my judgment on the security for costs application which was issued in October of last year.

[11]     Finally, there is the consideration that Mr Brittain referred to, that Court orders are there to be obeyed.   I agree that the Court should ensure that when it makes orders

it expects that there should be practical consequences arising from them.  The Court does not make idle orders in other words.

[12]     The next issue concerns the discovery point.  The Court has yet to deliberate on that issue and therefore the plaintiff’s proposition that the defendant’s insistence on being paid the costs of accessing the data is improper, has yet to be tested.  It may well be that the Court will agree with the defendant that it is the plaintiff, as the party who seeks the advantage of having discovery of the documents in question, will have to meet any unusual financial costs incurred in doing so which is not the fault of the defendant, and that therefore it is for the plaintiff to meet the expenses of taking that step.   I should add that that will not necessarily be the conclusion of the Court. There are however arguments both ways on that point.  In my view it cannot be said that this is a relevant consideration which should influence the Court when determining the stay application.

[13]     A further issue is that what is now sought is an order for stay (as contrasted with an order dismissing or striking out the proceeding).   The possibility that the plaintiff may at some future point be able to meet the costs order cannot be ruled out. Obviously at some point if the proceedings have remained stayed for a long time, their ultimate fate will have to be re-visited.  However that is not a matter the Court needs to concern itself with at this point.

[14]     On balance, I conclude that an order for stay as sought by the defendant ought to be granted and I make such an order under r 7.48.  The stay order is to take

effect forthwith and is to remain in force until further order of the Court.

J.P. Doogue

Associate Judge