Dalton v Adava Holdings Pty Limited

[2020] NZHC 2088

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-001916

[2020] NZHC 2088

UNDER

the Companies Act 1993

IN THE MATTER OF

the liquidation of FABRI-CELL INTERNATIONAL LIMITED (IN

RECEIVERSHIP AND LIQUIDATION)

BETWEEN

SIMON DALTON and MATTHEW PETER KEMP

First Plaintiffs

FABRI-CELL INTERNATIONAL

LIMITED (IN RECEIVERSHIP AND LIQUIDATION)

Second Plaintiffs

AND

ADAVA HOLDINGS PTY LIMITED

First Defendant

AVON COOK
Second Defendant

BENTLEYS CHARTERED ACCOUNTANTS LIMITED

Third Defendant

Hearing:

On the papers

Counsel:

S McAnally for Plaintiffs

G Jones for First and Second Defendants

Judgment:

20 August 2020

COSTS JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew

on 20 August 2020 at 3 pm pursuant to R 11.5 of the High Court Rules Registrar / Deputy Registrar – Date ……………………………………

DALTON & ORS v ADAVA HOLDINGS PTY LTD [2020] NZHC 2088 [20 August 2020]

Introduction

[1]                 The plaintiffs have filed a Notice of Discontinuance dated 20 December 2019. The second defendant, Mr Avon Cook, now seeks an order for costs in respect of that discontinuance.

[2]                 The proceedings have settled on a confidential basis as between the plaintiffs and the third defendant. However, the issue of costs as between the plaintiffs and the first and second defendants remains outstanding.

Costs sought by the first defendant, Adava Holdings Pty Ltd

[3]                 In his memorandum dated 14 July 2020, Mr Jones, counsel for the first and second defendants, advises that the first defendant, Adava Holdings Pty Ltd,1 is currently de-registered from the Australian Companies Register and that Mr Jones is in the process of reinstating and re-registering the company. Mr Jones submitted that the issue of costs in relation to the first defendant should be re-visited once that company has been reinstated and re-registered.

[4]                 However,  I accept the submission of the plaintiffs that the presumption in     r 15.23 of the High Court Rules (i.e. that a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant) does not apply in relation to the first defendant that has been struck from the Register of Companies in Australia. As Mr McAnally has submitted, the first defendant was removed from the Australian Companies Register on 16 December 2019 and therefore in advance of the filing of the Notice of Discontinuance. The proceeding had therefore come to an end against the first defendant by reason of it ceasing to possess legal personality. The Notice of Discontinuance therefore had no legal effect against it and r 15.23, in my view, has no application in this case.

[5]                 I further agree with Mr McAnally that it is not appropriate to defer the final determination of this proceeding for an indefinite period while counsel is in the process of reinstating and re-registering the company.

1      Mr Jones’ memorandum appears erroneously to refer to the company, Adava Holdings Pty Ltd, as the “second defendant”. I assume that was an error.

[6]                 Accordingly, the application by the first defendant company for costs is dismissed.

Application for costs by the second defendant, Mr Avon Cook

[7]                 Mr Cook has sought indemnity costs of $113,878 plus GST, or alternatively 2B costs plus disbursements of $35,819. In support of the application, Mr Avon has sworn an affidavit dated 14 July 2020, contending that the behaviour from the opposing parties throughout the litigation has been aggressive and uncompromising.

[8]                 I find that Mr Cook has failed to establish a proper basis for the award of indemnity costs. The threshold in r 14.6 is a high one and it is necessary to establish that the party from whom costs are sought has behaved either badly or very unreasonably.2 Much of the affidavit of Mr Cook contains no evidence relevant to the conduct of the plaintiffs and his complaints about the settlement do not, in my view, justify an award of indemnity costs in his favour.

[9]                 It is also well established that a claim for indemnity costs must be supported by some evidence and beyond the bare assertion of global figures provided in this case. That of course is required so that the Court can be satisfied as to the actual costs incurred in respect of the proceedings and that those costs were reasonably incurred.3 A “careful review” is required of the Court.4

[10]              It is not in dispute that Mr Cook is entitled to costs and on a 2B basis (my having rejected the application for indemnity costs). In relation to the calculation of quantum of scale costs, I accept the submission of Mr McAnally that the correct figure is $24,849 plus disbursements of $320. As Mr McAnally has submitted, Mr Cook has erroneously claimed a daily recovery rate of $2,380 for all steps preceding 1 August 2019, when r 11 of the High Court Amendment Rules 2019 came into effect. This means that the correct recovery rate for all steps with the exception of the plaintiffs’ amended statement of claim, is $2,230.

2      Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400, (2009) 19 PRNZ 385 (CA) at [27]–[28].

3      Rule 14.6(1)(b) of the High Court Rules.

4      Edel Metals Group Ltd & Anor v Geier Ltd & Ors [2018] NZCA 494 at [62].

[11]              I also note that Mr Cook has failed to provide a clear statement as to the relevant GST position. Indemnity costs will include GST if the party receiving the award is not GST registered and thus unable to recover GST, but will exclude GST if the party can recover GST.5

[12]              I accept in principle that costs can be awarded on a costs application. However, I reject the application by the plaintiffs for a deduction in this case.

Result

[13]              I order that the plaintiffs are to pay costs to the second defendant, Mr Avon Cook, on a 2B basis in the total sum of $24,849 plus disbursements of $320.

Associate Judge P J Andrew

5 New Zealand Venue & Event Management Ltd v Worldwide NZLLC [2016] NZCA 282, (2016) 27 NZTC 22-058 at [13].