Italian Surfaces NZ Limited (in liquidation) v Kitchen Magic Limited

[2014] NZHC 1724

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-000100 [2014] NZHC 1724

IN THE MATTER

of the Companies Act 1993

BETWEEN

ITALIAN SURFACES NZ LIMITED (In Liquidation)

Plaintiff

AND

KITCHEN MAGIC LIMITED Defendant

Hearing:

23 June 2014

(on papers)

Appearances:

Ms Natalie Tabb for Plaintiff
Mr James Skinner for Defendant

Judgment:

23 July 2014

COSTS JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on

23.07.14 at  3 pm, pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

ITALIAN SURFACES NZ LIMITED (In Liquidation) v KITCHEN MAGIC LIMITED [2014] NZHC 1724 [23

July 2014]

[1]      The plaintiff in this proceeding is seeking a liquidation of the defendant.  The defendant applied for an order restraining advertising and staying the proceedings on the basis that there was a substantial dispute as to whether in fact the defendant was indebted to the plaintiff.  That application which was an interlocutory application in the proceeding was opposed by the plaintiff.  However shortly before the date fixed for the hearing of the defended interlocutory application the plaintiff conceded that orders as sought could be made without opposition.   The parties agreed that the question of whether there was or was not a debt owing by the defendant to the plaintiff could be determined by ordinary civil proceedings.

[2]      The parties are now in dispute as to whether costs should be fixed on the application that the defendant brought and to which the plaintiff consented.   The plaintiff considers that the fixing of costs should be deferred and, together with the overall costs in the liquidation proceeding, should not be ruled upon until the final outcome of the liquidation proceeding is known, which of course is linked to the outcome of the civil proceedings concerning the debt.

[3]      In my view costs on the application ought now to be fixed.  The reasons for coming to that view are these.  First, the presumption under r 14.8 is that costs on an interlocutory application “unless there are special reasons to the contrary” must be fixed when the application is determined.

[4]      Further, r 14.2(g) provides that so far as possible the determination of costs should be predictable and expeditious.  Putting the matter off so that there can be a wider debate about the overall merits of the interlocutory proceeding would militate against the outcome that ought to follow from the application of r 14.2(g).

[5]      While the question of the overall outcome of the dispute about whether or not there is a debt will undoubtedly have some relevance to the question of costs in the overall substantive liquidation proceeding which will probably be factored into costs decisions on the proceeding which have to be made in due course, they are of less direct cogency when deciding the costs of the interlocutory application.  The position which  the defendant  took  was  that  by taking  the very step  of  proceeding with

advertising and progressing the liquidation proceedings oppressiveness or prejudice could result to the defendant and that therefore the orders that were sought staying further progress with the proceedings were required.   They were justified on the basis that at the point where they were sought there could be no certainty as to whether or not the defendant actually owed a debt.  In the end if a plaintiff elects to bring liquidation proceedings in other than clear cases where there is a debt, they run the risk that the very type of application which was made in this case will be made to prevent the liquidation proceedings progressing.   The fact that the plaintiff in this case  agreed  to  consent  to  the  making  of  the  orders  indicates  that  the  plaintiff accepted that such orders were appropriate and that its proceedings ought to be altered.  It is not unexpected that in situations where a plaintiff has an order of this kind made against them that costs will follow.   That consequence is one that a plaintiff risks when making the decision to bring liquidation proceedings in the first place if there is some doubt about the underlying debt.

[6]      There will be cases where a plaintiff in good faith commences liquidation proceedings without having any inkling that there is a substantial dispute about the debt.  Those cases are usually resolved informally by counsel and the parties using common sense and agreeing to a consent position while the existence of the underlying debt is tested in civil proceedings brought for that purpose.

[7]      I do not consider that the interests of justice are to be served by the Court countenancing satellite litigation about the issue of costs which involves the parties post the making of consent orders producing evidence and offering analysis of the question of whether the plaintiff was at fault in commencing the proceedings in the first place.  Such an approach, and it is apparently the one that the plaintiff invites here, is inimical to the objectives that fixing the costs be predictable and expeditious.

[8]      In my view, taking a broad view of matters, this is a straightforward case of a party being unsuccessful on an interlocutory application in the main proceedings. The indications in the rules are that the unsuccessful party should pay those costs.  I see no reason to depart from that position in this case.  Accordingly there will be an order that the plaintiff pays the cost of the interlocutory application.  Those costs are to be payable on a 2B basis.

[9]      I do not consider, either, that the case has unusual or exceptional features

which would justify the making of costs orders against the liquidator personally.

J.P. Doogue

Associate Judge