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Last Updated: 7 April 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-000648 [2014] NZHC 559
UNDER Section 266 of the Companies Act 1993
IN THE MATTER OF the liquidation of Capital Hospitality
Holdings Limited (in liquidation)
BETWEEN DAMIEN GRANT and STEVEN KHOV as liquidators of CAPITAL HOSPITALITY HOLDINGS LIMITED (IN LIQUIDATION)
Applicants
AND PRAKASH PANDEY First Respondent
C P HOTELS LIMITED Second Respondent
C P INVESTMENTS LIMITED Third Respondent
C P CARPARKS LIMITED Fourth Respondent
intituling cont'd ...
Hearing: On the papers
Judgment: 25 March 2014
JUDGMENT OF COURTNEY J
This judgment was deliveredy by Justice Courtney on 25 March 2014 at 3.30 pm
pursuant to R 11.5 of the High Court Rules
Registrar / Deputy Registrar
Date...............................
GRANT & OR v PANDEY & ORS [2014] NZHC 559 [25 March 2014]
C P PROPERTY INVESTMENTS LIMITED
Fifth Respondent
C P ASSET MANAGEMENT LIMITED Sixth Respondent
J D RAI & SONS LIMITED Seventh Respondent
ASIA PACIFIC HOTEL INVESTMENTS LIMITED
Eighth Respondent
RAISONS PACIFIC INVESTMENTS LIMITED
Ninth Respondent
BABOO MAHENDRA PRATAP RAI Tenth Respondent
CAPITAL INVESTMENTS CORPORATION LIMITED Eleventh Respondent
[1] In my decision 12 December 2013 I determined applications brought by the liquidators of Capital Hospitality Holdings Limited (in liquidation) (CHH) under s
266(1) and (2) of the Companies Act 1993.1 I
determined both applications in the
liquidators’ favour, making orders under s 266(1) that Prakash Pandey
and Baboo Rai attend the liquidators’ offices
for an interview and
orders under s 266(2) requiring the respondents to produce records and
documents relating to CHH.
[2] The liquidators have sought costs on either a 2B or 2C
basis as if the applications were originating applications
brought under Part
19 of the High Court Rules. The respondents resist costs being awarded on that
basis on the ground that the application
was an interlocutory application and
should attract the time band for interlocutory steps under the third
schedule.
[3] The liquidators also seek an uplift of 50 per cent to reflect the
lack of merit in
the respondents’ opposition to the applications, which the respondents
resist.
Should the applications be treated as originating applications or
interlocutory applications for the purposes of costs?
[4] Under r 31.35 of the High Court Rules sub-part 2 of Part 7
(relating to interlocutory applications and orders) applies to
a company in
respect of which a liquidator has been appointed under s 241(2)(c) of
the Companies Act 1993. However, that
provision does not apply to any
application to which Part 18 or 19 of the High Court Rules apply.
[5] Under r 19.4 a liquidator may seek directions of the Court by way of an originating application. It is not required to be brought in that way, however, and Mr Hucker, for the respondents, has submitted that, because the applications in this case were brought as interlocutory applications pursuant to Part 7, they are not to be treated as originating applications for the purposes of costs. Mr Hucker does not accept that the decision in Grant & Khov v Stinson, on which the liquidators rely, is relevant: he considers that it stands only for the proposition that an application for
directions may be brought as an originating application, not that an
application for
1 Capital Hospitality Holdings Ltd (in liquidation) v Pandey [2013] NZHC 3330.
directions that has not been brought by way of an originating application
should nevertheless attract costs as if it had been.2
[6] I do not accept Mr Hucker’s submission. On a completely
literal reading of the rules one would accept that an application
for directions
under s 266 of the Companies Act should only attract costs on the basis of it
being an originating application if,
in fact, it has been brought in that way.
However, I do not consider that to be the intention of the rules and, in any
event, would
regard this situation as one justifying a departure from a strict
reading of r 14.
[7] Further, I consider that Mr Hucker’s reading of Stinson
is too narrow. In that case, the liquidators brought an application under s
266 by way of an interlocutory application. Precisely
the same issue arose in
that case as arises here; counsel (Mr Hucker as it happens) argued that the
application fell within r 31.35(1)
and was to be dealt with as an interlocutory
application. Associate Judge Abbott rejected that argument on the basis that
the application
could have been so brought under Part 19 by virtue of r 19.4 and
that, given the nature of the application and the opposition to
it that would
have been the appropriate course. For that reason, the Associate Judge
considered it right to treat the application
as falling within r 31.35(4) i.e.
as if it were an application brought under Part 19. There was never any
argument, it would seem,
that the liquidators could not have brought the
application under Part 19 had they wished. The complaint simply was that they
had
not done so. So Mr Hucker’s submission in this case that
Stinson “simply stands for the proposition that a liquidator
may bring an application for s 266 orders as an originating application”
is not right.
[8] Nor do I accept that Sargison v McCabe, on which Mr Hucker relied, assists in any way.3 Mr Hucker submitted that the Court in that case had accepted that the s 266 application should be treated as an interlocutory application for the purposes of costs. Although this is true in a strict sense, as Mr Norling, for the liquidators,
pointed out, the issue was not argued; the application had actually been
brought as an
2 Grant & Khov v Stinson [2013] NZHC 325.
3 Sargison v McCabe [2012] NZHC 3194.
originating application but, as was recorded in the judgment, counsel agreed
for the purposes of costs that it be treated as an interlocutory
application.
[9] The present case is far removed from a straightforward and
uncontested application for directions which is not contested.
The issues were
hard fought, with the respondents taking every conceivable point in
opposition to the liquidators’
applications. This was a case
that might properly have been brought as an originating application and
which, in substance,
the parties treated as such. In these circumstances I am
satisfied that if, in a strict sense, the liquidators’ application
cannot
be treated as an interlocutory application for the purposes of costs because it
was not brought as such, then it is a situation
that warrants departure from the
rules, as is envisaged by r 14.1(2).
Should costs be uplifted?
[10] Under r 14.6 the Court may make an order increasing the costs
otherwise payable. The grounds on which such an order may
be made include
taking or pursuing an unnecessary step or an argument that lacks merit4
and failing, without reasonable justification, to admit facts, evidence,
documents or accept a legal argument.5
[11] The liquidators point to the sustained effort by the respondents to distance themselves from CHH, notwithstanding advice from C P Group’s corporate counsel on 8 August 2012 confirming that the documents would be provided (impliedly acknowledging that the respondents had control or possession of the documents). In relation to the tenth respondent, Mr Rai, time was taken up with an argument over jurisdiction which had essentially been advanced and rejected in another related
proceeding.6
[12] I was satisfied at the time I delivered my decision that the respondents had maintained unmeritorious arguments and in doing so had essentially wasted the
liquidators’ and the Court’s time in doing so. I do not
accept the suggestion in Mr
4 Rule 14.6(3)(b)(ii).
5 Rule 14.6(3)(b)(ii).
6 Grant v Pandey [2013] NZHC 2844.
Hucker’s memorandum on costs that the respondents were merely seeking
to define or clarify the scope of documents the liquidators
were seeking. This
is a proper case for an increase in costs and I accept that an uplift of 50% is
reasonable.
Result
[13] I consider that costs should be awarded on a 2B basis as if the application had been brought as an originating application under Part 19 and, further, that the costs should be uplifted by 50 per cent to reflect the factors I have discussed. This means that the calculation shown at the end of paragraph 3 on page 8 of Mr Norling’s memorandum dated 20 January 2014 represents the correct calculation. There will be costs to the liquidators of $28,059 as shown in that table and disbursements of
$50 for the filing fee.
[14] Finally, the liquidators applied for and obtained an order for substituted service on the tenth respondent in August 2013. They seek costs of $2,189 and
disbursements of $200 in respect of that application, which I
grant.
P Courtney J
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