Burney v Manaia Grove Ltd [2018] NZHC 1031 (11 May 2018)

Last Updated: 30 May 2018

IN THE HIGH COURT OF NEW ZEALAND MASTERTON REGISTRY I TE KŌTI MATUA O AOTEAROA TE WHAKAORIORI ROHE

CIV-2017-435-15 [2018] NZHC 1031

UNDER	the Companies Act 1993
IN THE MATTER	of an application for liquidation
BETWEEN	JILLS HELEN ANGUS BURNEY Plaintiff
AND	MANAIA GROVE LTD Defendant

Appearances:	Mr A Beck for plaintiff Mr J Goddard for defendant No appearance for Deborah Jeane Hambly
Judgment:	11 May 2018

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON ON COSTS

[On the papers]

[1] The plaintiff commenced this proceeding by notice of proceeding and statement of claim dated 7 July 2017 seeking an order pursuant to s 241 of the Companies Act 1993 for the appointment of a liquidator to, and the winding up of, the defendant, Manaia Grove Ltd. The Court made such an order on 10 April 2018.

[2] A little background: the plaintiff and Deborah Jeane Hambly were domestic partners. They formed Manaia as a vehicle for the ownership of their home in Masterton. They were both shareholders in, and the directors of, the company. Their relationship broke down. The break up was bitter. There were recriminations. Ms Burney obviously concluded that the only way of getting the house sold and the proceeds distributed was to wind Manaia up. So she commenced this proceeding. Ms Hambly opposed her application. Vehemently. Lengthy affidavits were

BURNEY v MANAIA GROVE LTD [2018] NZHC 1031 [11 May 2018]

exchanged. There were interlocutory skirmishes. Eventually, the orders sought by Ms Burney were made by consent. But, in the meantime, both parties incurred substantial costs. Neither, I confidently expect, will look back on their involvement in the proceeding with unadulterated pride. On Ms Burney’s behalf, Mr Beck now seeks costs. He wisely restricts the application to scale costs and proposes a 2B basis for their calculation.

[3] There are two features of this application which call for elaboration.

[4] First, Mr Beck includes in his calculations the scale costs associated with Ms Burney’s application pursuant to s 246 of the Act for the appointment of an interim liquidator. That application was refused by Associate Judge Smith in a judgment dated 24 August 2017. Whilst his Honour declined to appoint an interim liquidator, it is obvious from the terms of his judgment that he had some sympathy for Ms Burney’s wish to have third party input, and made arrangements for an early fixture. In relation to this I accept the submission that the application for the appointment of an interim liquidator was a reasonable step for Ms Burney to have taken, notwithstanding that it was ultimately unsuccessful, and that it was in part that application which lead to Ms Hambly withdrawing her opposition to the winding up of Manaia.

[5] Second, Mr Beck submits that the costs order which Ms Burney seeks should be made not against the company in liquidation, but against Ms Hambly. In doing so, he refers me to Dymocks Franchise Systems (NSW) Pty Ltd v The Todd (No. 2)¹ and Mana Property Trustee Ltd v James Developments Ltd.² The Privy Council’s reasoning in Dymocks was applied by the Supreme Court in Mana, where the Supreme Court said:³

The Privy Council recognised that in some cases where a non- party may have both controlled the proceeding and funded it, so as to benefit from it, justice will require that if the proceeding fails, the non-party will pay the successful party’s costs.

¹ Dymocks Franchise Systems (NSW) Pty Ltd v The Todd (No. 2)¹ [2005] 1 NZLR 145 (PC).

² Mana Property Trustee Ltd v James Developments Ltd (2010) 20 PRNZ 715 (SC).

³ At [11].

[6] Mr Beck submits that that description applies directly to the present circumstances.

[7] In both of those cases the courts referred to the English Court of Appeal’s judgment in Metalloy Supplies Ltd (in liq) v M A (UK) Ltd⁴ in which Millett L J said that costs orders against third parties (such as directions or liquidators in the case of corporate litigants) will be rare, and should not be made where the proceeding in question is brought or defended “... bone fide and for the benefit of the company ...”, but that it will be just and reasonable to visit costs on a third party where he, she or it “... is considered to be the real party interested in the outcome of the suit.”

[8] That, it appears to me, exactly describes this case.

[9] There is another factor which might be advanced in favour of any costs order being made against Ms Hambly. In the normal course of events in winding up litigation, costs are awarded against the company in liquidation, and enjoy preferential status. Given that Manaia’s only asset was the home in which Ms Burney and Ms Hambly lived, an order against the company would effectively mean that Ms Burney would receive the benefit of only such share of those costs as relate to the shares she does not own. The liquidator would of course pay the costs order from the proceeds of the sale of the house, and the amount ultimately payable to Ms Burney and Ms Hambly as the shareholders would be reduced in proportion to their shareholding.

[10] As the successful litigant in this case, Ms Burney is prima facie entitled to her costs. The starting point is that costs follow the event. Furthermore, having reviewed the file it is obvious to me that the costs in this case would not have been incurred but for Ms Hambly’s opposition to the application, which stance she ultimately abandoned.

[11] In those circumstances, I accept that the proper course here is to award Ms Burney scale costs against Ms Hambly.

⁴ Metalloy Supplies Ltd (in liq) v M A (UK) Ltd [1994] 1 WLR 1613.

[12] The liquidator takes a neutral stance.

[13] On receipt of Ms Burney’s application and supporting material, I caused the Registry to make specific enquiries as to whether these had been served on Ms Hambly’s solicitors. I am informed that those enquiries were made and that Ms Hambly’s solicitors acknowledged receipt of the application. Given that Ms Hambly was represented throughout the litigation by a respected Palmerston North firm, I am confident that they will have discharged their responsibilities to ensure that Ms Hambly was aware of this application and advise her in relation to it. She has chosen not to oppose it.

[14] I have reviewed Mr Beck’s calculation of scale costs on a 2B basis and they appear to me to be in order.

[15] Accordingly, I award costs in favour of the plaintiff against Ms Hambly in the sum of $14,941 together with disbursements in the sum of $1,771.55.




Associate Judge Johnston

Solicitors:

Cuba Family Law, Wellington for plaintiff WCM Legal, Wairarapa for defendant

Jacobs Florentine, Palmerston North for Deborah Jeane Hambly