Wu v Intellistud Limited

[2024] NZHC 216

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-344

[2024] NZHC 216

UNDER

the Companies Act 1993

BETWEEN

XIANG WU

Plaintiff

AND

INTELLISTUD LIMITED

Defendant

Hearing:	On the papers
Appearances:	Kenneth Sun for the Plaintiff Trent Bowler for the Defendant
Judgment:	19 February 2024

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 19 February 2024 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

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

Solicitors:

Capstone Law Limited (Kenneth Sun), Parnell, Auckland, for the Plaintiff Neilsons Lawyers (Trent J P Bowler), Onehunga, Auckland, for the Defendant

XIANG WU v INTELLISTUD LIMITED [2024] NZHC 216 [19 February 2024]

Introduction

[1]On 20 November 2023 the Court made the following orders:

(a)extending an interim order restraining advertising of the plaintiff’s liquidation proceeding made on 6 June 2023, pending further order of the Court;

(b)dismissing, by consent, the defendant’s application to strike out the proceedings and restrain advertising which was  due to be heard on  20 November 2023; and

(c)requiring counsel for the defendant to file a memorandum as to costs (not exceeding five pages) within 5 working days, and counsel for the plaintiff to file a memorandum in response (not to exceed five pages), a further 5 working days from receipt of counsel for the defendant’s memorandum.

[2]        Mr Sun, for the plaintiff, filed a memorandum as to costs dated 8 December 2023 and Mr Bowler, for the defendant, filed a memorandum as to costs dated 3 January 2024. Mr Sun seeks an award of costs on a 2B basis with a 50 per cent uplift in relation to the defendant’s strike out application. Mr Bowler seeks an award of costs on a 2B basis with a 50 per cent uplift in respect of the defendant’s without notice application to restrain advertising and its on notice application to restrain advertising.

Background to the proceeding

[3]        The plaintiff is a director and shareholder of the defendant. On 21 February 2023, the plaintiff filed a statement of claim to put the defendant into liquidation on the basis that the defendant was unable to pay its debts.

[4]        On 13 March 2023 the defendant filed an interlocutory application for orders to strike out the liquidation proceeding and restrain advertising to which the plaintiff filed a notice of opposition. A half-day fixture to hear the defendant’s application was

set down for 20 November 2023, but immediately before the hearing, counsel for the parties agreed by consent for the strike-out application to be dismissed.

The plaintiff’s position

[5]        Mr Sun submits that the plaintiff had strong grounds to oppose the strike-out application because:

(a)as a director and shareholder of the defendant, the plaintiff has standing to apply to the Court for orders to appoint a liquidator under s 241(2)(c)(ii) and (iii) of the Companies Act (the Act);

(b)the defendant is cash-flow insolvent because the company’s current liabilities are $206,172 higher than its current assets as at 30 April 2023. Therefore the defendant may be put into liquidation under s 241(4)(a) of the Act for its inability to pay its debts as they fall due;

(c)in the alternative, the directors of the defendant are breaching their duty under s 135 of the Act by trading recklessly while the defendant is balance-sheet insolvent, operating at a significant loss and struggling to pay creditors. Therefore the defendant may be put into liquidation under s 241(4)(bb)(i) of the Act.

[6]        Mr Sun submits that the defendant did not make any settlement offers to the plaintiff with respect to the strike-out application and although the defendant agreed to discontinue its strike-out application on the day of the hearing, the plaintiff had already carried out all the preliminary work ahead of the hearing.

[7]        Mr Sun submits that the plaintiff should be regarded as being successful in its opposition to the strike-out application and therefore costs should follow the event; that there should be a 50 per cent uplift in costs under r 14.6(3)(b) as the defendant’s agreement to discontinue the strike-out application came too late, resulting in the plaintiff incurring unnecessary costs to deal with an unnecessary step; and that the

defendant’s strike-out application lacked merit because the plaintiff ‘s assertion that the company was insolvent was supported by objective evidence.

Defendant’s position

[8]        Mr Bowler submits that the defendant was at least partially successful in terms of the application to strike-out and/or restrain advertising in that:

(a)the application to strike out the proceedings was settled by consent of both parties; and

(b)the application for an order restraining the advertisement of the proceedings pending further order of the Court was successful.

[9]        Mr Bowler submits that the defendant also succeeded in the earlier without notice application to restrain advertising and accordingly costs are sought on behalf of the defendant in relation to both the on notice and without notice applications and all steps relating to those applications.

[10]      Mr Bowler submits that the application to strike-out or stay in proceeding and the application to restrain advertising were pleaded in the alternative, and the defendant succeeded in the order restraining advertising the proceedings and was therefore, at least partially, successful.

[11]      Mr Bowler submits that the without notice application to restrain advertising was necessary as the plaintiff continued to threaten to advertise the proceedings prior to the defendant’s application to restrain advertising being heard by the Court. He also points to the defendant granting the plaintiff an indulgence for further time to file its opposition to the defendant’s application and submits that the threats by the plaintiff to advertise the proceedings prior to the application being heard, given the indulgence granted by the defendant, was a clear abuse of process and accordingly submits that there should be an increased costs award in favour of the defendant.

[12]      Mr Bowler seeks 2B costs in respect of the without notice application to restrain advertising and the on notice interlocutory application to restrain advertising, with a 50 per cent uplift.

Result

[13]      Given the respective positions of the plaintiff and the defendant as set out above, I am of the view that in the circumstances:

(a)The plaintiff should be awarded 2B costs with no uplift in respect of the defendant’s strike-out application only and not in respect of the defendant’s application to restrain advertising.

(b)The defendant should be awarded costs on a 2B basis, with no uplift in respect of the defendant’s without notice application to restrain advertising, and the defendant’s on notice application to restrain advertising but not in respect of the defendant’s application to strike out the proceeding.

Orders

[14]I make the following orders:

(a)Costs are awarded to the plaintiff on a 2B basis, with no uplift, in respect of steps taken in relation to dealing with the defendant’s application to strike out the proceeding but not in respect of the application to restrain advertising pleaded in the alternative by the defendant;

(b)Costs are awarded to the defendant on a 2B basis, with no uplift, in respect of the without notice and on notice applications to restrain advertising of the proceedings.

[15]      I appreciate the orders at [14] may involve apportioning time spent between different aspects of aggregate time spent. If the parties are unable to agree costs, leave is granted to apply to the Court for further orders.

…………………………….. Associate Judge Taylor