Whitley v SDCIC Architecture Limited
[2023] NZHC 785
•6 April 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-002301
[2023] NZHC 785
UNDER the Companies Act 1993 IN THE MATTER OF
the liquidation of Ezybuilding Group Co. Limited (in liquidation)
BETWEEN
KEVIN JOHN WHITLEY as liquidator of Ezybuilding Group Co Ltd (in liquidation) Applicant
AND
SDCIC NZ ARCHITECTURE LIMITED
First Respondent
HUA WU
Second Respondent
Hearing: On the papers Appearances:
R B Hucker for the Applicant
A Ho for the Second Respondent
Judgment:
6 April 2023
COSTS JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 6 April 2023 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Crimson Legal, Auckland Zhang Law Ltd, Auckland Hucker Law, Auckland
Alden Ho, Auckland
WHITLEY v SDCIC NZ ARCHITECTURE LTD [2023] NZHC 785 [6 April 2023]
Introduction
[1] Kevin Whitley, as liquidator of Ezybuilding Group Co Limited, applied for orders under ss 295 and 297 of the Companies Act 1993 against SDCIC NZ Architecture Limited and Hua Wu. The orders sought concerned $20,000 Ezybuilding Group transferred to SDCIC, a trade creditor, and a vehicle allegedly transferred to Mr Wu, its former director, shortly before liquidation.
[2]SDCIC did not take any steps in the proceeding and was ordered to repay the
$20,000 transferred.1 Mr Wu disputed that the vehicle was transferred to him. The Court accepted that the vehicle was transferred to SDCIC rather than Mr Wu personally.
[3] The liquidator was ordered to pay Mr Wu’s costs and invited to file a memorandum if costs were sought against SDCIC. The liquidator and Mr Wu have been unable to agree a costs order.
[4] I apologise to the parties for the delay in costs being addressed by the Court, which was due to an unfortunate administrative oversight.
Costs for the liquidator against SDCIC
[5] The liquidator seeks costs on a scale 2B basis against SDCIC of $8,365 and disbursements of $785.50. I am satisfied that these costs and disbursements are reasonable and appropriate.
Costs for Mr Wu against the liquidator
[6] Mr Wu seeks scale costs on a 2B basis and disbursements totalling $17,257.45 (costs of $16,730 and $527.45 of disbursements). He claims for two separate notices of opposition and supporting affidavits, one in relation to the liquidator’s application for the order under s 295 for repayment of the voidable transaction and one for the alternative order under s 297 for compensation for an asset transferred at undervalue. Mr Wu submits that while there was some overlap, the two separate claims added to
1 Whitley v SDCIC NZ Architecture Ltd [2022] NZHC 1528.
the time required to prepare his affidavit and submissions. Evidence on the value of the vehicle and further factual evidence was required for the s 297 claim.
[7] Mr Wu also claims for the costs associated with preparation of the memorandum on costs and for sealing the costs order.
[8] If the Court does not accept his claim for two notices of opposition and affidavits, Mr Wu claims increased costs under r 14.6(3)(a) or r 14.6(3)(b)(v). In respect of the first ground, Mr Wu submits that the proceeding was for two separate matters that required an increased amount of time. In respect of the second ground, Mr Wu proffers evidence of settlement offers made to the liquidator prior to the hearing of between $15,000 and $25,000. Mr Wu submits that the liquidator’s failure to accept these offers was unreasonable in the circumstances. Accordingly, he seeks increased costs with an uplift of 50 per cent, to a total of $17,925 plus disbursements.
[9] In response, the liquidator says that there was only one application to the Court, and only one notice of opposition and one affidavit in support. He submits that it will not be necessary for Mr Wu to seal the costs order, as the liquidator will seal the full judgment. Furthermore, he disputes that costs should be ordered on the costs memoranda.
[10] The liquidator says that the offers of settlement from Mr Wu came exceptionally late in the piece after the liquidator had incurred significant expense, and the preparation of his submissions were well advanced. He submits that it is relevant that the liquidator has a statutory duty to pursue voidable transactions and to recover assets of the company under s 253 of the Companies Act 1993.
Evaluation
[11] I reject Mr Wu’s claim for 2B costs and disbursements based on two separate notices of opposition and supporting affidavits. The liquidator’s application may have sought alternative orders under two different sections of the Companies Act, but despite that, it was a single originating application to which Mr Wu responded with a single notice of opposition and affidavit.
[12] I also reject Mr Wu’s alternative claim to increased costs. The onus is on Mr Wu to persuade the Court that an award of increased costs is justified.2 I am not persuaded that an award of increased costs under r 14.6(3)(a) is justified because “the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C”.3 Mr Wu’s reason for claiming increased costs under this rule is the same as that which I have just rejected: that the application and his opposition should be treated as two applications for the purposes of costs. There is no basis for concluding that the proceedings were so complex that the time required exceeded the allocation under band C. It was a reasonably orthodox and straightforward proceeding.
[13] Nor am I persuaded that Mr Wu should be paid increased costs under r 14.6(3)(b)(v). Courts can make an order for increased costs under this rule if the party opposing costs contributed unnecessarily to the time or expense of the proceeding by “failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding”.4 Increased costs may be awarded where a party failed to act reasonably.5
[14] The rationale for an award of increased costs under r 14.6(3)(b)(v) is that the Court’s scarce resources should not be burdened by litigants who reject reasonable settlements, proceed with litigation, and fail to achieve more than what was previously offered.6 The unreasonableness of rejecting a settlement offer is to be assessed at the time of rejection.7
2 Bates v Auckland Council [2022] NZHC 336 at [30].
3 High Court Rules 2016, r 14.6(3)(a).
4 High Court Rules 2016, r 14.6(3)(b)(v).
5 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [27].
6 Bates v Auckland Council, above n 2 at [31]; and Commercial Factors Ltd v Meltzer [2018] NZHC 3141 at [51] citing Bluestar Print Group (NZ) Ltd v Mitchell [2010] NZCA at [20].
7 Easton Agriculture Limited v Manawatu-Wanganui Regional Council HC Palmerston North CIV- 2008-454-31, 22 December 2011.
[15] Factors courts may consider in determining whether to award increased costs include:8
(a) the size of the offer relative to the actual costs of counsel;
(b) the amount of the claim;
(c) the reasonable expectations of the party that refuses the offer;
(d) the amount of preparation for trial already undertaken;
(e) whether the proceeding concerns an uncertain area of law;
(f) whether the parties were in a position to assess the merits when the offer was received;
(g) the information available to the party who receives the offer and the extent to which they can to assess the offer.
(h) the timing of the offer;
(i) the conduct of the offeror. (footnotes omitted)
[16]Mr Wu submits that he made the following settlement offers:
(a)On 24 March 2022 offering $15,000 in full and final settlement.
(b)On 27 March 2022 offering $20,000 in full and final settlement.
(c)On 29 March 2022 offering $25,000 in full and final settlement.
(d)On 30 March 2002 offering $25,000 in full and final settlement.
[17] I do not accept that the liquidator acted unreasonably when rejecting Mr Wu’s settlement offers. The first offer was made four days before the liquidator’s synopsis of submissions, common bundle and authorities were due.9 As such, preparations for the proceeding would have been well underway.10 Despite this, it is evident that that liquidator did engage with the settlement offers. A joint memorandum was filed after
8 Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].
9 As per the timetable set out in Whitley v SDCIC Architecture NZ Ltd HC Auckland CIV-2021- 404-2301, 3 February 2022 per Associate Judge Sussock.
10 Loktronic Industries Ltd v Diver [2014] NZHC 1189 at [14].
the first two offers in which the parties sought more time to explore settlement. This timetabling extension was granted by Moore J.11 During this extension the parties continued settlement discussions with the liquidator making counteroffers.
[18] Further, liquidators have a statutory duty to pursue voidable transactions and recover company assets.12 While the liquidator was ultimately unsuccessful with respect to the application against Mr Wu, it was not a hopeless case. I consider that standard costs against the liquidator are appropriate in these circumstances.
[19] Any award of ‘costs on costs’ is at the discretion of the court.13 Costs on costs are often awarded when a party has been wholly successful in its costs claim.14 Mr Wu has not been wholly successful in his cost claim, failing to persuade the Court that an award of increased costs is justified. Mr Wu has also not established that it took considerable time or expense to address the complexity or dispute associated with the costs claim.15 Accordingly, Mr Wu’s costs claims for the costs associated with preparation of the memorandum on costs and for sealing the costs order fails.
[20] Mr Wu seeks disbursements for the fees of a private translator. The fees of a private translator are recoverable provided they are reasonable and comparable to fees charged by other interpreters.16 The liquidator has not objected to this claim. I accept that these fees are a reasonable disbursement.
Result
[21]I order:
(a)SDCIC to pay the liquidator costs on a scale 2B basis of $8,365 and disbursements of $785.50; and
11 Whitley v SDCIC Architecture NZ Ltd HC Auckland CIV-2021-404-2301, 29 March 2022 per Moore J.
12 Meltzer & Mason v Fastlane Auto Ltd HC Auckland CIV-2005-404-3648, 20 September 2006 at [13]–[18].
13 Strata Title Administration Ltd v Body Corporate Administration Ltd [2014] NZCA 96 at [14]; and Harrington v Wilding [2019] NZCA 605 at [45].
14 Helilogging Ltd (in rec & liq) v Civil Aviation Authority of New Zealand [2021] NZHC 1676 at [34]; and Energy Securities LP v Vector Ltd [2019] NZHC 1387 at [27].
15 Zhang v Tian [2018] NZHC 906 at [35]; and Little Republic New Zealand Ltd v Kum Fu Stainless Kitchen Equipment Ltd [2021] NZHC 1836 at [31].
16 Zeng v Cai [2018] NZHC 2277 at [33]–[37].
(b)the liquidator to pay Mr Wu costs on a 2B basis of $10,516 and disbursements of $527.45.
Associate Judge Gardiner
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