Ebr Holdings Limited (in liquidation) v McLaren Guise Associates Limited

[2018] NZHC 1970

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2014-404-2008

[2018] NZHC 1970

BETWEEN

EBR HOLDINGS LIMITED (IN LIQUIDATION)
Plaintiff

AND

McLAREN GUISE ASSOCIATES LIMITED

First Defendant

NIGEL DALE HARRISON

Second Defendant

Hearing:

On the papers

Counsel:

P Murry and L Deane for Plaintiff

P R Rzepecky for the First Defendant P Cogswell for the Second Defendant

Judgment:

2 August 2018

JUDGMENT OF JAGOSE J

This judgment is delivered by me on 2 August 2018 at 4.30pm pursuant to r 11.5 of the High Court Rules.

.....................................................

Registrar / Deputy Registrar

Solicitors/Counsel:
Meredith Connell, Auckland

PR Rzepecky, Barrister, Auckland Cogswell Law, Auckland

Eugene St John, Barrister, Auckland

Copy to:
IM Hutcheson, Non-Party

EBR HOLDINGS LTD (IN LIQUIDATION) v McLAREN GUISE ASSOCIATES LTD [2018] NZHC 1970

[2 August 2018]

[1]                 The plaintiff’s liquidators sought, but ultimately withdrew its application for, non-party discovery from Smith and Partners, a firm of solicitors.1 Smith and Partners previously acted for the plaintiff’s former directors.

[2]                 Smith and Partners sought the liquidators’ confirmation its expenses would be met. The liquidators declined, expressing the view solicitors were not usually entitled to such indemnity. Nonetheless, Smith and Partners took steps to recover its relevant documents (which comprised electronic copies of its file released to the former directors years earlier), and to assess them for relevance and privilege. Smith and Partners incurred expenses in the amount of its own (charged) time, and that of counsel instructed to assist, totalling nearly $12,000 (inclusive of GST). That is now sought to be recovered from the liquidators.

[3]                 Whata J took the view Smith and Partners’ expenses should be met and, in making the sought order, Courtney J required the liquidators to address how those expenses were to be met. She directed Smith and Partners was not required to comply with her order until the issue of their expenses was resolved. Instead, the liquidators withdrew their application.

[4]                 Under HCR 8.22(3), I may order the applicant to pay to Smith and Partners the whole or part of its expenses incurred in relation to the non-party discovery application, and in complying with any order made on the application. But the applicant here was the plaintiff (in liquidation), which cannot meet those expenses.

[5]                 The general rule is non-parties’ reasonable discovery expenses should be met,2 in full.3 This is a distinct rule from any award of costs in the proceeding, and therefore the liquidators’ opposition to personal costs liability here on grounds there has been no impropriety in their conduct is irrelevant.4 That immunity is based in the liquidators’ issuance of proceedings in pursuit of the company’s assets, in which they are bound to act reasonably, even if ultimately unsuccessful. But there are other

1      HCR 8.21.

2      Clear Communications Ltd v Telecom Corporation of NZ Ltd (1994) 8 PRNZ 200 (HC);

3      Australian Mutual Provident Society v Architectural Windows Ltd [1986] 2 NZLR 190 (HC) at 203.

4      Mana Property Trustee Ltd v James Developments Ltd [2010] NZSC 124, [2011] 2 NZLR 25 at [10].

options for defendants, such as applications for security for costs, to protect themselves against prospectively impecunious plaintiffs.

[6]                 Those are not options for non-parties, who indeed may find themselves liable for costs in the proceeding, if unreasonably opposing applications for non-party discovery.5 But it will not be unreasonable for a non-party to refuse to take any steps in providing discovery to a company in liquidation until liability for payment of its expenses in doing so is established. That is recognised by Whata and Courtney JJ’s comments. Conversely, it may be unreasonable of a liquidator to require a non-party to take such steps without accepting liability for payment of its reasonable expenses.

That is an analogous in-road to liquidators’ immunity from costs.6

[7]                 This was clearly appreciated by Smith and Partners, whose 12 April 2018 correspondence with the liquidators’ counsel indicated they would comply with the application if their reasonable expenses incurred in complying were to be met. Yet Smith and Partners simultaneously began incurring expenses.7 It is not clear to me from the evidence tendered in support of Smith and Partners’ claim those expenses reasonably were incurred, given the circumstances as I have outlined them. They cannot then be said to have been compelled by the liquidators, and Smith and Partners expressly sought to be free of obligation until liability was established.

[8]Accordingly, I dismiss Smith and Partners’ claim.

—Jagose J

5      Nelson v Dittmer [1986] 2 NZLR 48 (HC); British Markitex Ltd v Johnston (1987) 2 PRNZ 535 (HC).

6      See Mana Property Trustee Ltd above n 4.

7      At least its counsel’s account shows time to be incurred since 11 April 2018. Smith and Partners’ own efforts are not located in time.