Pillay v Registrar of Companies

[2018] NZHC 1179

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2959

[2018] NZHC 1179

UNDER

The Companies Act 1993

IN THE MATTER OF

an application to restore GALVESTON NOMINEES (2009) LIMITED to the

Companies Register

BETWEEN

VASINTHA PILLAY

Applicant

AND

THE REGISTRAR OF COMPANIES

First Respondent

THE SECRETARY TO THE TREASURY
Second Respondent

DAMIEN MITCHELL GRANT
and

STEVEN KHOV as former liquidators of GALVESTON NOMINEES (2009) LTD

(In Liq)
Third Respondents

MARK JOHN SALMON

Fourth Respondent

Hearing:

On the papers

Appearances:

A Ho for the Applicant

J Wong for the Third Respondents

Judgment:

24 May 2018

JUDGMENT OF ASSOCIATE JUDGE R M BELL

[on recall application]

This judgment was delivered by me on 24 May 2018 at 11:00am

pursuant to Rule 11.5 of the High Court Rules.

…………………………………

Deputy Registrar

PILLAY v THE REGISTRAR OF COMPANIES [2018] NZHC 1179 [24 May 2018]

[1]                   On 26 April 2018, I dismissed Ms Pillay’s application for Galveston Nominees (2009) Ltd to be restored to the register.1 While the Registrar of Companies and the Secretary for the Treasury abided the decision of the court, the former liquidators, Messrs Grant and Khov, and the former director and shareholder, Mr Salmon, appeared in opposition. I ordered costs in favour of the liquidators and Mr Salmon on a category 2 basis. I hoped that the parties would agree on costs but reserved leave to apply.

[2]                 On 18 May 2018 Ms Pillay filed a memorandum seeking re-call of the costs order in favour of the liquidators in the light of Associate Judge Matthews’ decision in Commissioner of Inland Revenue v New Orleans Hotel.2 The recall application meets the requirement of r 11.9 of the High Court Rules—the order has not been drawn up and sealed. It is within the first criterion under Horowhenua County Council v Nash (No 2).3 Associate Judge Matthews’ decision in Commissioner of Inland Revenue v New Orleans Hotel 2011 Ltd was given on 7 May 2018 and is relevant to the matter raised by Ms Pillay. Her case is that the court should not award costs in favour of the liquidators, because they were represented by in-house counsel. Associate Judge Matthews held that in the light of the decisions of the Court of Appeal in Joint Action Funding Ltd v Eichelbaum4 and McGuire v The Secretary for Justice,5 costs could not be awarded under Part 14 of the High Court Rules in favour of a lawyer who appeared for himself or in favour of a party who was represented by in-house counsel. In the interest of consistency, I should follow Commissioner of Inland Revenue v New Orleans Hotel 2011 Ltd.

[3]                   That, however, is not the end of the matter. The former liquidators were respondents to the application to restore the company to the register. Ms Pillay sought an order setting aside their final report and proposed that they be put back into office as liquidators. The court needed to hear from them. Under s 276 of the Companies

1      Pillay v Registrar of Companies [2018] NZHC 842.

2      Commissioner of Inland Revenue v New Orleans Hotel 2011 Ltd [2018] NZHC 971.

3      Horowhenua County Council v Nash (No.2) [1968] NZLR 632.

4      Joint Action Funding Ltd v Eichelbaum [2017] NZCA 249, [2018] 2 NZLR 70.

5      McGuire v Secretary for Justice [2018] NZCA 37.

Act 1993, liquidators appointed under a shareholders’ resolution are entitled to charge reasonable remuneration for carrying out their duties and exercising their powers as liquidators. If the company were restored to the register, the liquidators would have been entitled to their remuneration for resuming their roles. I indicated that if the company were restored Ms Pillay should pay their remuneration under s 276 as the restoration was to be solely for her benefit.6

[4]                   The liquidators’ position here is analogous to that of a non-party who has successfully resisted an application for non-party discovery under r 8.21 of the High Court Rules. The analogy applies, because the purpose of Ms Pillay’s application for restoration to the register was to obtain non-party discovery for another proceeding. Non-parties who are respondents to applications for discovery under r 8.21 may recover costs, but not under Part 14 of the High Court Rules. Where the court orders non-party discovery, the non-party may recover costs under r 8.22(3):

(3) If an order is made under r 8.20(2) or 8.21(2), the Judge may, if the  Judge thinks it just, order the applicant to pay to the person from whom discovery is sought the whole or part of that person’s expenses (including solicitor and client costs) incurred in relation to the application and in complying with the new order made on the application.

Because costs under r 8.22(3) are not confined to solicitor and client costs, other actual costs may be recovered, including the costs of in-house counsel. Case law has established that non-parties may also recover costs, including actual costs, when no order is made under r 8.21.7

[5]                   There is no means by which former liquidators of companies removed from the register (and therefore assetless) can recover their costs for successfully opposing a restoration application, unless the court orders costs. By analogy under r 1.6, in this case the court has the power to order costs in the same way as it orders costs to a non- party in an application under r 8.21.

6      Pillay v Registrar of Companies [2018] NZHC 842 at [26].

7See McGechan on Procedure HR.8.22.03 and Commerce Commission v Cards NZ Ltd HC Auckland, CIV-2006-485-2535, 10 December 2009. While it turned on its own circumstances, Commerce Commission v Cards NZ Ltd is interesting as the non-parties recovered costs for executive time spent on the application, as well as in-house counsel and solicitor-client costs.

[6]                   As to the exercise of the discretion, it is appropriate that the former liquidators should have costs. Their presence was required. If the court had restored the company to the register, the former liquidators would have recovered their expenses out of the liquidation. They should not be deprived of their expenses because the court decided in its discretion not to restore the company. There is nothing in the way the liquidators ran their case to warrant denying them costs. While the former liquidators opposed the restoration application and were vindicated in the result, that is not determinative. They may also have costs if they had taken a neutral position or consented to restoration. They should have the costs of their in-house counsel as reasonable remuneration for their work on the restoration application. The former liquidators may claim for him at the rates that the court would approve on making a liquidation order.8 I do not however see that the court should order costs in respect of others in the practice. That would go beyond the purpose of a costs order in meeting a party’s costs in having legal representation in a proceeding.

[7]                   Accordingly, I grant the applicant’s recall application and set aside my order that the applicant is to pay the former liquidators costs under Part 14 of the High Court Rules. Instead I order the applicant to pay the former liquidators costs of their in- house counsel for his work on the application at the rate normally approved by the court. I hope that counsel will agree on the amount of costs, but if they cannot, memoranda may be filed.

……………………………….

Associate Judge R M Bell

Solicitors:
Martelli McKegg (A W Johnson/A Ho), Auckland, for the Applicant

Waterstone Insolvency (Joshua Wong), Auckland, for the Third Respondents

8      These insolvency practitioners regularly seek approval of rates for in-house counsel when the court appoints them liquidators.