Northpower Limited v All Gas Solutions Limited HC Auckland CIV-2010-404-2564 [2011] NZHC 1022 (22 August 2011)

Last Updated: 1 October 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2010-404-2564}

UNDER the Companies Act 1993

IN THE MATTER OF of an application to put the company into liquidation

BETWEEN NORTHPOWER LIMITED Plaintiff

AND ALL GAS SOLUTIONS LIMITED Defendant

Counsel: A M Hutton for Plaintiff

P Stevenson for Defendant

Judgment: 22 August 2011 at 4:30 PM

JUDGMENT OF ASSOCIATE JUDGE SARGISSON (On Costs)

This judgment was delivered by me on 22 August 2011 at 4.30 pm pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date ..........................

Solicitors:

R A Fraser & Associates, PO Box 163, Christchurch

D Burgess, PO Box 7114, Auckland

NORTHPOWER LIMITED V ALL GAS SOLUTIONS LIMITED HC AK CIV-2010-404-2564 22 August 2011

Introduction

[1] On 8 December 2010, the plaintiff, Northpower Limited, discontinued its liquidation proceeding against the defendant, All Gas Solutions Limited. The only outstanding issue for determination relates to costs.

[2] Northpower seeks an order for costs on a 2B basis on its statutory demand and the liquidation proceeding, pursuant to the discretion reserved in High Court Rule 15.23. However, All Gas opposes such an order and submits that costs should lie where they fall.

[3] Rule 15.23 states:

Unless the defendant agrees otherwise or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay the costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

[4] There is no dispute that the normal incidence of costs on a discontinued proceeding should not apply in this case. The essential question is whether the justice of the case warrants not simply that costs lie where they fall, but an award in favour of the discontinuing plaintiff.

[5] For reasons I shall come to, I am satisfied that Northpower is entitled to compensation for its costs. First, I refer briefly to the background.

Background

[6] All Gas is a company that facilitates the installation of gas meters to enable gas connections to the Vector gas network. One of its approved contractors is Northpower.

[7] On 10 February 2010, Northpower served a statutory demand on All Gas under s 289 Companies Act 1993 requesting payment of three invoices for work it says it had undertaken for All Gas at 142 Taharoto Road, 59 Lunn Avenue and 66

Stoddard Road. The invoices, for sums totalling $16,960.53, were issued in 2008 and 2009.

[8] All Gas took no steps to have the statutory demand set aside, nor did it pay any of the sums demanded in the three invoices. Consequently, on 25 March 2010

Northpower made application to the Court by statement of claim to have All Gas put into liquidation. The claim was supported by affidavit and advertised in the required way.

[9] On 21 May 2010, All Gas filed a statement of defence. It pleads that All Gas: (a) Had paid the invoice relating to Taharoto Road, for $1,795.48;

(b) Was not liable for the Lunn Avenue invoice as a third party had requested the work; and

(c) Was not liable for the invoice for Stoddard Road as the work should have been charged to Vector.

[10] On 9 June 2010, All Gas indicated its wish to file affidavit evidence in support of its position and sought time. The Court made timetable directions for the filing and service of affidavit evidence in opposition and reply, plus submissions. It also allocated a fixture for a defended hearing on 30 August 2010.

[11] Though undisputed, and despite the pleading to the contrary in the statement of defence, the Taharoto Road invoice was not paid until 21 July 2010.

[12] On 9 August 2010, All Gas filed its affidavit evidence setting out its position on the invoices for Stoddard Road and Lunn Avenue, being for $13,811.17 and

$1,353.88 respectively. The evidence, well over a month late, posits that All Gas was not liable for these invoices and expands on the grounds set out in the statement of defence. On 30 August 2010, the fixture for 30 August was vacated by consent, and a new date was allocated for a defended hearing on 11 November 2010.

[13] On 27 September 2010, Northpower filed its affidavit evidence in reply. It rejected All Gas’ contention that it was not responsible for the remaining invoices. It produced material that showed that All Gas indeed had requested the work at Lunn Avenue and provided Northpower with a signed quotation acceptance form in

accordance with the usual procedure adopted by the parties. It also produced an email exchange showing that All Gas accepted its quote for the work at Stoddard Road.

[14] Rebuttal evidence followed on 5 November 2010 in which All Gas continued to dispute liability for the Lunn Avenue and Stoddard Road invoices. In respect of the latter, it reiterated that Northpower had not followed required procedure for its request to undertake work on the Vector network. It also produced evidence to show it had the capacity to pay the remaining invoices should it eventually be found liable.

[15] On 11 November 2010, the day allocated for the defended hearing of the liquidation application, All Gas paid the invoice for $1,353.88 in respect of Lunn Avenue. Counsel for each of the parties appeared and requested an adjournment for settlement discussions. The trial judge approved of that course stating that there seemed to be little point in hearing an opposed application for an order for liquidation as All Gas had shown it was able to pay the remaining debt and had paid the disputed amount into its instructing solicitors’ trust account. The parties were invited to try to resolve the dispute, failing which they were to consider afresh the mechanisms to be used to resolve it.

[16] On 8 December 2010, Northpower withdrew its application to put All Gas into liquidation and agreed that the dispute should be resolved in an alternative forum.

Relevant Principles

[17] The principles applicable to the application for costs are well established.

[18] Rule 15.23 raises a presumption that a discontinuing party will be liable for costs, but reserves to the court discretion to order otherwise. Generally, the court will not inquire into the merits of the case that has been discontinued unless the

answer is clear and obvious. The Court will look at the reasonableness of the bringing of the proceeding and of the defending of the proceeding.[1]

[19] Once the above considerations are taken into account, the matter is to be considered pursuant to the costs regime found in rr 14.1 to 14.17 of the High Court Rules. Under r 14.1, matters of costs relating to a proceeding are at the discretion of the court. The general principles to be applied in the exercise of that discretion are those contained r.14.2. The first general principle is contained in r 14.2(a) and requires that the party who fails with respect to a proceeding should pay the costs to the party who succeeds. In Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt) Ltd the Court of Appeal, in noting the court’s

over-riding discretion, said:[2]

...there is a strong implication that a Court is to apply the regime in the absence of some reason to the contrary: Body Corporate 97010 v Auckland City Council. We do not think that a Court should hesitate to depart from the regime where appropriate but we agree that some articulation of the reason for doing so is to be expected, however succinct. If no reason is given it will expose the award to close appellate scrutiny.

[20] In Glaister & Ors v Amalgamated Dairies Ltd & Anor the Court of Appeal endorsed the proposition in Mansfield Drycleaners Ltd. It noted that if there was any departure from the costs regime as set out in the High Court Rules, such could only be done on a particularised and principled way.[3]

[21] The Court of Appeal added:[4]

The discretion exists, and this court has noted that where judges are satisfied it is appropriate to do so they ought not to hesitate to resort to the discretion. But...such an exercise...must be a considered and particularised exercise of the discretion...

Discussion

[22] Northpower submits essentially that it acted reasonably throughout the proceeding and that the justice of the case warrants that it be compensated by an award of scale costs on a 2B basis.

[23] Plainly, it would be inappropriate in the circumstances of this case to order Northpower to pay costs on its discontinued proceeding, and the concession implicit in All Gas’ submission that there should be an order that costs lie where they fall, is properly made. There is merit in Northpower’s submission that it acted reasonably in serving the statutory demand, and in bringing and continuing the proceeding. Indeed, All Gas does not argue that Northpower acted unreasonably in serving the statutory demand. Clearly, Northpower had a reasonable basis for doing so in relation to all three invoices. Two were eventually conceded, and there is no dispute that the third was issued on the basis of a quote that Northpower had submitted to All Gas and All Gas had accepted. Nor does All Gas take issue with the reasonableness of Northpower’s bringing the proceeding. Northpower was entitled to proceed on the statutory presumption of insolvency that arose when All Gas’ failed to take any steps with respect to the statutory demand. The statutory demand went unchallenged and unpaid.

[24] All Gas’ real argument is twofold. First, that Northpower refused to accept that the affidavit evidence filed on 9 August and 5 November 2010 gives rise to a genuine dispute about the Stoddard Road invoice and shows that it is plainly arguable that All Gas ought not to have been invoiced for the work undertaken. Secondly, that Northpower was slow to respond to the evidence of 5 November and to accept that the payment of funds into its solicitor’s trust account demonstrated the ability to pay the outstanding amount. In these respects, it submits, Northpower acted unreasonably and therefore should not be permitted to recover costs.

[25] The argument is in part conclusory. It invites me to find that there is merit in All Gas’ contention that it has an arguable defence with respect to the Stoddard Road invoice, though that is not clear and obvious. But even assuming there is a genuine dispute over liability for the Stoddard Road invoice, the argument overlooks All

Gas’s unfounded and persistent denial of its liability for the Lunn Avenue invoice until 11 November. This, and its failure (until the eleventh hour) to provide evidence of its ability to pay the balance sought by the statutory demand, mean that it has itself to blame for the continued proceeding. The evidence of ability to pay was provided a mere four working days before the substantive hearing on the application for adjudication was due to take. By then the parties were or should have been well and truly ready for hearing. All Gas cannot complain that it was put to unnecessary cost.

[26] Further, in respect of the two invoices that All Gas eventually paid, Northpower was essentially the successful party.[5] It is therefore entitled to some compensation under the presumption in r 14.2(a).

[27] The result is that I am satisfied that Northpower is entitled to the order that it seeks. There is no dispute that should costs be awarded they should be awarded on

2B basis.

[28] Accordingly, I made an order for costs against All Gas in favour of

_{Northpower on a 2B basis plus disbursements as fixed by the Registrar.}

_{Associate Judge Sargisson}

---

[1] _{North Shore City Council v Local Government Commission (1995) 9 PRNZ 182.}
[2] _{CA 296/01 23 September 2002 at (27) the Court of Appeal}

[3] _{Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 at [22].}

[4] At [28].

[5] Ford v First National Real Estate Ltd [2006] NZHC 385; (2006) 18 PRNZ 432 at [8].