Commissioner of Inland Revenue v Property Ventures Limited (in liquidation and in receivership)

[2013] NZHC 1836

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2010-409-000123 [2013] NZHC 1836

UNDER

Section 266 of the Companies Act 1993

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND

PROPERTY VENTURES LIMITED (IN LIQUIDATION AND IN RECEIVERSHIP)

Defendant

AND

ROBERT BRUCE WALKER

Applicant

AND

NEW ZEALAND POLICE

Respondent

Hearing:

25 March 2013

(with costs submissions received 2 and 15 July 2013)

Counsel/Parties:

K P Sullivan for Liquidator (R B Walker)

D I Henderson (in person) and on behalf of GP 96 Ltd

Judgment:

24 July 2013

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

as to costs

The application for costs

[1]      I  am  required  to  determine  costs  on  the  outcome  of  the  liquidator’s application for production of company records.

[2]      The liquidator brought that application naming the New Zealand Police as respondent.  The New Zealand Police had, both before and following the issuing of

THE COMMISSIONER OF INLAND REVENUE v PROPERTY VENTURES LIMITED (IN LIQ AND IN REC) [2013] NZHC 1836 [24 July 2013]

the proceedings, been prepared to abide arrangements between the parties or the outcome of a Court decision.

[3] The effective opponents in the application were Mr Henderson and GP 96 Ltd, who opposed the making of the orders sought. There were ten identified grounds of opposition. They included grounds both that the Court lacked jurisdiction to make the orders and that the safeguards proposed by the liquidator to protect the interests of third parties were not adequate.

[4] In the event, the Court held that it had jurisdiction. The Court made orders directing the New Zealand Police to deliver the documents requested to the liquidator, and directed the liquidator to take certain steps in relation to the categorising and safeguarding of documents.1

Costs - principles

[5]      Two sets of provisions in the High Court Rules are most relevant in this case.

[6] Rule 14.1(a) provides that the party who fails with respect to a proceeding or interlocutory application should pay  the  costs  of  the  party  who  succeeds. Mr Henderson makes the point that neither he nor GP96 Ltd was an original party to the application. As r 14.2(a) specifically refers to “the party”, Mr Henderson’s submission is strictly correct – r 1.3 defines “party” to mean:

Any  person  who  is  a  plaintiff  or  a  defendant  or  a  person  added  to  a proceeding.

Mr Henderson and GP96 Ltd do not fall into any of those categories. They were persons directed to be served with the proceeding.  However, it is settled that the broadly-based r 14.1 costs discretion may be exercised against or in favour of non- parties to civil litigation.2 The exercise of the jurisdiction will be clearly appropriate where a  non-party, served with an application, exercises the right to appear  in opposition.

1       The  Commissioner of  Inland Revenue v  Property  Ventures Limited  (In  Liquidation and  in Receivership) [2013] NZHC 1368.

2       Erwood v Maxted (2010) 20 PRNZ 466 (CA) at [18], per Randerson J delivering the judgment of the Court.

[7] The second aspect of the High Court Rules costs regime most relevant to this proceeding is the categorisation of proceedings under r 14.3. It is accepted on both sides that this is a category 2 proceeding, being of average complexity and requiring counsel of skill and experience, considered average in the High Court.

The liquidator’s application

[8] The liquidator applies for costs on a 2B basis. He seeks a certificate for the reasonable costs of travel of counsel for the hearing. Mr Sullivan has submitted a schedule of steps from the filing of the application to the sealing of the order, which correctly indicates that the total for costs would be $10,746. The total for disbursements would be $752.48.

Mr Henderson’s opposition

[9]      In opposition, Mr Henderson made five points, which I will deal with in turn.

(a)Proceeding against the Police

[10] Mr Henderson submits that, because an application against the Police was required, there should either  be  no  order  for  costs  or  the  components  of Mr Sullivan’s schedule should at least be reduced for the initial steps.

[11] I do not accept that submission. To the extent that the Police had to bring an application because of the prior search warrant obtained, that application was made in the District Court. The application in relation to the documents on which the High Court made orders could have been dealt with by consent if all parties had agreed to that course. It was the opposition of Mr Henderson and GP96 Ltd which required a proceeding, hearing and orders in this Court.

(b)Absence of non-compliance by GP96 Ltd or Mr Henderson

[12] Mr Henderson submits that costs should not be ordered because there was no finding of non-compliance with s 261 Companies Act 1993 by himself, GP96 Ltd or, indeed, the Police.

[13]  The Court in fact found that it had jurisdiction to make the orders requested by the liquidator. Once that point is reached, and orders were made, the costs jurisdiction arises.

(c)Orders encompassing protective measures

[14] Mr Henderson refers to the background to his concerns as to the behaviour and reliability of the liquidator. He notes that his position in the litigation has been that he had no objection to the liquidator receiving information to which he was entitled. Rather, Mr Henderson wished to have documents and records examined by another party, and then released to the liquidator, so as to protect the legitimate personal and privacy rights of Mr Henderson and GP96 Ltd. Although the Court’s orders leave the liquidator with the task of holding and categorising the documents, the Court reached that point after an undertaking was given by the liquidator not to disclose irrelevant or privileged information. Mr Henderson claims a partial measure of success in this regard.

[15] The Court must stand back and take an overall view. The liquidator has succeeded, albeit with conditions which are slightly different to and more sophisticated than those proposed by the liquidator himself.

(d)Urgency cutting across full information

[16] Mr Henderson submits that the speed with which the liquidator’s application was brought on for hearing meant that there was no “full consideration of relevant authorities or (even in a limited form) any discovery”. He submits, with reference to an instance of the disclosure of information to a third party, of which Mr Henderson

became aware after the  delivery  of  the  judgment  on  11  June  2013,  that Mr Henderson did not have the ability to demonstrate the extent of likely breaches of rights carried out by the liquidator.

[17] The thrust of Mr Henderson’s submission must be that a different outcome might have been reached if the Court had, for instance, received further information as to alleged breaches of privacy rights on the part of the liquidator. I view that as essentially an appeal point. For now, the judgment of 11 June 2013 stands. Even had there been a demonstrated instance of inappropriate release of information by the liquidator, the outcome of the application would still have been that the liquidator would have successfully obtained orders for release of appropriate information to him, perhaps with additional conditions.

(e)Liquidator’s non-use of s 266 Companies Act

[18] Mr Henderson finally complains that the liquidator has not explained why he did not bring an application under s 266 Companies Act in April 2011, instead of making a complaint to the Police. (The Police complaint in due course led to the execution of the search warrant and the consequential issues with documents, which were in part dealt with in the High Court judgment).

[19] It is not the Court’s focus in the present application to look at the earlier history by which documents of the companies in liquidation came to be where they are. The liquidator of those companies had the right to obtain orders for the production of the documents and was successful in obtaining such orders. In the judgment on 11 June 2013, I referred to the statutory focus under s 253 Companies Act on efficiency and timeliness in the administration of liquidations.3 A parallel approach may be adopted by the Court when determining costs which flow out of a liquidator’s application properly brought.

3       The  Commissioner of  Inland Revenue v  Property  Ventures Limited  (In  Liquidation and  in Receivership) [2013] NZHC 1368 at [35].

Conclusion

[20]     The liquidator is entitled to costs on a 2B basis, together with disbursements (including reasonable travel costs).

Orders

[21]     I order:

(a)David Ian Henderson and GP96 Ltd jointly and severally are to pay to the applicant his costs and disbursements of the application dated 15 March 2013, which I fix in the sum of $11,498.48.

Associate Judge Osborne

Solicitors:

DLA Phillips Fox – Wellington Crown Law Office, Wellington D I Henderson, Christchurch