100 INVESTMENTS LIMITED v IAG NEW ZEALAND LIMITED [2019] NZHC 535

100 INVESTMENTS LIMITED v IAG NEW ZEALAND LIMITED [2019] NZHC 535 [22 March 2019]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2016-409-888[2019] NZHC 535BETWEEN 100 INVESTMENTS LIMITED for itselfand in the name of LICHFIELDVENTURES LIMITEDPlaintiffAND IAG NEW ZEALAND LIMITEDDefendantOn the papersCounsel: P W Michalik for PlaintiffK C Francis for Liquidator of Lichfield Ventures Limited (in liq)Judgment: 22 March 2019JUDGMENT OF THOMAS J(COSTS)[1] In 2016, 100 Investments Limited (100 Investments) began proceedingsagainst IAG New Zealand Limited (IAG) in respect of an insurance claim. The claimrelated to property owned by 100 Investments but previously owned by LichfieldVentures Limited (Lichfield) which was damaged by the 2010/2011 Canterburyearthquakes (the Property). In late-2018, a settlement was reached, subject to a formaldetermination of this Court, as to the entitlement of 100 Investments to receive theinsurance proceeds. IAG did not oppose 100 Investments' claim in this regard and ahearing took place in November 2018, essentially on a formal proof basis as IAG didnot seek to be heard.[2] Following the hearing, the liquidator for Lichfield (the Liquidator) requestedcertain information about the proceeding from IAG and filed submissions with theCourt raising issues as to 100 Investments' entitlement to the insurance proceeds.Judgment was eventually given for 100 Investments, who now seeks costs against theLiquidator.1Background[3] The Property was owned by Lichfield, which was placed into liquidation on16 December 2010. 100 Investments' claim was based on its rights as the registeredproprietor of the Property following a mortgagee sale. In the alternative,100 Investments relied on its rights under a general security agreement, being the firstregistered security agreement under the Personal Property Securities Register inrespect of Lichfield's personal property. As mortgagee in possession of Lichfield'spersonal property, 100 Investments also purported to bring proceedings in the name ofLichfield.[4] Following the formal proof hearing, the Liquidator approached IAG recordingthe Liquidator's position that he did not accept that 100 Investments was entitled toexercise any rights or claims in the name of Lichfield; 100 Investments was notauthorised to provide a good discharge of any obligations owed by IAG to Lichfield;no agreement was binding on Lichfield except with the Liquidator's express consent;and that the Liquidator reserved his rights against IAG in the event any funds to whichLichfield was entitled were paid to third parties, including 100 Investments, withouthis knowledge and consent.[5] Counsel for IAG, Mr Till QC, informed the Court that IAG had previouslyreceived a notice from the Liquidator under s 261 of the Companies Act 1993,requesting certain information about the proceeding. Mr Till informed the Court thatthe requested information was provided on 10 September 2018. This included therelevant insurance policy and copies of the pleadings, including their current statusand the fact it was scheduled for trial commencing on 5 November 2018. Mr Tillnoted in his memorandum that, as the Liquidator was aware of the proceeding and trialdate in September 2018, IAG had anticipated, if the Liquidator intended to pursue any1 100 Investments Limited v IAG New Zealand Ltd [2018] NZHC 3244.issues regarding 100 Investments' entitlement, it would have taken steps to do sobefore the hearing on 5 November 2018.[6] Counsel for 100 Investments immediately filed a memorandum with the Courtobjecting to the Liquidator's actions. Mr Michalik noted that the Liquidator had notapplied to be joined as a party, nor otherwise sought to become involved before theCourt.[7] The Liquidator responded by memorandum to the Court, saying:8. The Liquidator, on behalf of creditors of [Lichfield] other than 100Investments, wishes to have an opportunity to consider the materialand determine whether to provide brief submissions to the Court as tothe entitlement of 100 Investments to [Lichfield]'s property. This isparticularly important as the Court does not appear to have receivedthe views of any contradictor in relation to the orders sought.[8] The Liquidator then requested copies of the material before the Court and anopportunity to consider whether he wished to make any submissions and/or bring theissue to the attention of any other secured creditors. The Liquidator sought directionsaccordingly. Again, Mr Michalik objected on behalf of 100 Investments, repeatingthat there was no application for the Liquidator to become a party and noting he hadnot provided an address for service.[9] I convened an urgent teleconference on 15 November 2018, as a result of whichcounsel for 100 Investments and for the Liquidator were requested to confer, with theLiquidator to file and serve a memorandum if he wished to pursue any matter.[10] By memorandum dated 20 November 2018, the Liquidator raised two issues,both of which, in his submission, might have impacted on other secured and unsecuredcreditors. The first issue was the extent of 100 Investments' rights as an assignee ofLichfield's mortgagee. The second issue concerned 100 Investments' entitlement toretain the settlement proceeds.[11] Mr Michalik filed a memorandum addressing those issues.[12] By my judgment of 11 December 2018, I discussed the issues raised by theLiquidator but concluded I was satisfied 100 Investments was the party entitled to theproceeds of the insurance claims under Lichfield's insurance policies in respect of theProperty.2[13] The settlement between 100 Investments and IAG recorded there was no issueas to costs in the proceedings. 100 Investments had requested to be heard in respectof costs incurred as a result of the Liquidator's actions.[14] 100 Investments now seeks costs against the Liquidator in his personalcapacity on an indemnity basis. The Liquidator opposes this course, submitting thatcosts should lie where they fall.[15] Subsequent to my judgment, the second ranking secured creditor applied for,and was granted, an interim injunction preventing IAG disbursing the full settlementsum to 100 Investments on the basis it had an entitlement to any sums in excess of thefirst mortgagee's priority sum.3The law[16] Costs are at the discretion of the Court, qualified by the principles in theHigh Court Rules (the Rules).4 The intent of the Rules is to provide reliable andexpeditious costs decisions and to do justice to the parties.5 The general principle isthat costs follow the event unless particular considerations indicate otherwise.6[17] Rule 14.6 governs the awarding of increased and indemnity costs:2 100 Investments Ltd v IAG New Zealand Limited, above n 1, at [23]–[46].3 PVG Securities Trustee Ltd v IAG New Zealand Limited HC Auckland CIV-2018-404-002838,21 December 2018 (Minute).4 High Court Rules 2016, r 14.1(1)–(2); and Manukau Golf Club Inc v Shoye Venture Ltd [2012]NZSC 109, [2013] 1 NZLR 305 at [7]–[8].5 High Court Rules 2016, r 14.2(1)(g).6 Rule 14.2(1)(a); and Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR523 at [19].14.6 Increased costs and indemnity costs(1) Despite rules 14.2 to 14.5, the court may make an order—(a) increasing costs otherwise payable under those rules(increased costs); or(b) that the costs payable are the actual costs, disbursements, andwitness expenses reasonably incurred by a party (indemnitycosts).(3) The court may order a party to pay increased costs if—(a) the nature of the proceeding or the step in it is such that thetime required by the party claiming costs would substantiallyexceed the time allocated under band C; or(b) the party opposing costs has contributed unnecessarily to thetime or expense of the proceeding or step in it by—(i) failing to comply with these rules or with a directionof the court; or(ii) taking or pursuing an unnecessary step or anargument that lacks merit; or(iii) failing, without reasonable justification, to admitfacts, evidence, documents, or accept a legalargument; or(iv) failing, without reasonable justification, to complywith an order for discovery, a notice for furtherparticulars, a notice for interrogatories, or othersimilar requirement under these rules; or(v) failing, without reasonable justification, to accept anoffer of settlement whether in the form of an offerunder rule 14.10 or some other offer to settle ordispose of the proceeding; or(c) the proceeding is of general importance to persons other thanjust the parties and it was reasonably necessary for the partyclaiming costs to bring it or participate in it in the interests ofthose affected; or(d) some other reason exists which justifies the court making anorder for increased costs despite the principle that thedetermination of costs should be predictable and expeditious.(4) The court may order a party to pay indemnity costs if—(a) the party has acted vexatiously, frivolously, improperly, orunnecessarily in commencing, continuing, or defending aproceeding or a step in a proceeding; or(f) some other reason exists which justifies the court making an orderfor indemnity costs despite the principle that the determination ofcosts should be predictable and expeditious.[18] Bradbury v Westpac Banking Corp is the leading case on increased andindemnity costs and the principles outlined in that judgment have recently beenconfirmed by the Court of Appeal.7 In Bradbury, the Court of Appeal describedincreased costs as warranted where "there is failure by the paying party to actreasonably" and indemnity costs "where that party has behaved either badly or veryunreasonably".8 Specifically, the Court identified the following circumstances whereindemnity costs have been ordered:9(a) the making of allegations of fraud knowing them to be false and themaking of irrelevant allegations of fraud;(b) particular misconduct that causes loss of time to the court and to otherparties;(c) commencing or continuing proceedings for some ulterior motive;(d) doing so in wilful disregard of known facts or clearly established law;(e) making allegations which ought never to have been made or undulyprolonging a case by groundless contentions, summarised inFrench J's "hopeless case" test.Costs against an intervener[19] In Earthquake Commission v Insurance Council of New Zealand, a full Benchof the High Court addressed costs following its judgment concerning the scope ofstatutory cover available under the Earthquake Commission Act 1993 and the validityof a policy developed by the Earthquake Commission for dealing with claims arisingout of increased flooding vulnerability.10 All parties had agreed that costs should liewhere they fell. The interveners took a different position, seeking an order requiring7 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400; and Ben NevisForestry v Commissioner of Inland Revenue [2014] NZCA 348, (2014) 22 PRNZ 322.8 At [27].9 At [29].10 Earthquake Commission v Insurance Council of New Zealand Inc [2015] NZHC 457.the Commission to pay costs to them. The application was made pursuant to s 99A ofthe Judicature Act 1908. Like the High Court Rules, s 99A confers a broad discretionon the Court in relation to costs. In the decision, the full Bench noted the discretionmust be exercised on a principled basis and the inquiry will depend upon the particularcircumstances. In relation to whether an order under s 99A was appropriate, the Courtoutlined the following factors:11(a) whether the case involves a matter of substantial public importance;(b) whether the intervener represents a field of interest relevant to theproceeding beyond their private or personal viewpoint;(c) whether the intervener provided material assistance to the Court bypresenting evidence or submissions on an issue or issues not adequatelycovered by the other parties or at all;(d) whether any of the principles guiding a costs award under theHigh Court Rules may be applicable by analogy.[20] The cases canvassed by the High Court in that decision all concerned anintervener's application for costs against a party. In the event, the High Court declinedto make an order for costs in favour of the interveners in the circumstances.[21] In Wallace Corp Ltd v Waikato Regional Council,12 the successful party,Waikato Regional Council, sought costs against the intervener, URS NZ Limited, ongrounds including that the involvement of the intervener increased the complexity ofthe case.13 However, the Court of Appeal declined to award costs against theintervener, saying:[6] As to the involvement of URS as an intervener, it had a legitimateinterest in the outcome of the appeal. Its presence at the appeal did not addmaterially to the length of the appeal, or to the extent of the preparationrequired of the Council, as the submissions of the appellants and URS were11 At [6].12 Wallace Corp Ltd v Waikato Regional Council [2011] NZCA 350.13 At [4].complementary rather than repetitive. Again, URS did not raise vexatious orfrivolous points.[22] The ultimate task of the Court is to make an assessment of overall justice asbetween the particular parties, in the particular circumstances. Relevant to thisassessment is, inter alia, whether and in what manner the parties participated in theproceedings.The application for costs[23] 100 Investments' application is on the basis that it seeks compensation fromthe Liquidator for the additional costs occasioned by his informal application tointervene in the proceedings. 100 Investments notes that the arguments raised by theLiquidator were unsuccessful and therefore, as the successful party, seeks costs on afull indemnity basis.[24] 100 Investments submits that the Liquidator sought to intervene in his ownname and not in the name of Lichfield. This, therefore, distinguishes the Liquidator'sconduct from a case where the liquidator is acting merely as an agent for the companyin relation to litigation concerning the company's rights or properties. This case fallsinto a different category where the liquidator is required or chooses to bring aproceeding or application in his or her own name.14 In such a case the liquidator ispersonally liable for any adverse award of costs should his or her application beunsuccessful and liability is not limited by the assets of the company.15[25] In support of his submission that the Liquidator sought to intervene in his ownname, Mr Michalik points out that both memoranda filed by counsel for the Liquidatorare described as filed on behalf of Mr Walker, the Liquidator, and not on behalf ofLichfield. The address for service was that of the Liquidator. Further, the Liquidator'sinitial application for access to the Court file was presented as an adjunct to his requestto IAG under s 261 of the Companies Act 1993. Such a request is pursuant to a14 See Andrew Beck and others Morison's Company Law (online looseleaf ed, LexisNexis) at[55.23], where the learned authors contrast cases such as Mana Property Trustee Ltd v JamesDevelopments Ltd [2010] NZSC 124, [2011] 2 NZLR 25 with cases such as Re Wilson Lovatt &Sons Ltd [1977] 1 All ER 274; Asia Pacific Hotel Investments Ltd v Grant [2015] NZHC 1460;and CP Asset Management Ltd v Grant [2012] NZHC 2573.15 Morison's Company Law, above n 14, at [55.23], n 4.liquidator's rights rather than being a right of the company in liquidation. Finally, theinitial justification for the Liquidator's intervention was because 100 Investments waspurporting to sue in the name of Lichfield and the Liquidator's position was that hisconsent as Liquidator was required.[26] I accept Mr Michalik's submissions in this regard. I also accept his submissionthat, as the Liquidator's involvement progressed, the focus moved to his concern thatthe settlement sum might exceed the first mortgagee's priority and that this may impacton other creditors, including secured creditors. Those issues, arguably, are not theconcern of Lichfield.[27] I do not understand the Liquidator to take any real issue with this aspect of100 Investments' application for costs. He instead submitted that specialconsiderations apply to awarding costs against a liquidator personally when acting inpursuit of his or her statutory obligations to investigate the affairs of a company andidentify and collect any assets.Costs against an intervener[28] While the Liquidator takes issue with his memorandum being treated as aninformal application to intervene, contending it was limited to seeking documentswhich would enable him to determine whether to take further steps, he says he iscontent to approach the matter broadly on this basis.[29] I make two observations on this comment. Although the Liquidator initiallyappeared to limit his request to the provision of documents, once some were disclosedand counsel had discussed the matter with Mr Michalik, the Liquidator's approachbecame significantly more wide-ranging. Furthermore, the importance of hearingfrom the Liquidator given "the Court does not appear to have received the views ofany contradictor" was raised in the first memorandum from counsel for the Liquidator.[30] For these reasons, I am satisfied it is appropriate (as in any event the Liquidatorconcedes) to consider the Liquidator's position as analogous to that of an intervener.Should an award of costs against the Liquidator be made?[31] Counsel for the Liquidator submits the key question is whether it is appropriatefor the Court to award costs against the Liquidator in circumstances where theLiquidator has simply filed a memorandum with the Court, without being served withproceedings. The purpose of the memorandum was to alert the Court to the interestsof other parties, specifically creditors of Lichfield, and potential issues with100 Investments' claimed entitlement to the exclusion of other creditors.[32] There is no doubt that the steps taken by the Liquidator were taken with thepurpose of seeking to raise issues in fulfilment of what the Liquidator had alreadyidentified as the need for a contradictor.[33] The Liquidator refers to the decision of Re Osborne and submits that, unlike inthat case, there was no indication here that the Liquidator would potentially be liablefor costs.16 Re Osborne is not authority for the proposition that, absent any suchindication from the Court, an intervener will not be liable for costs. The Liquidator isclearly a seasoned litigator and it would be disingenuous to suggest that he did notappreciate the potential of an adverse costs award.[34] In this case, the Liquidator was aware, on the basis of the information providedto him by IAG in September 2018, that the hearing was scheduled for 5 November2018. He was certainly aware of the proceedings and, in any event, had the ability tocheck the status of them direct with the High Court. I have some disquiet about theway in which the Liquidator chose to seek to intervene in these proceedings, that is bynot raising any issue until after the hearing. That is a course of conduct which is notto be encouraged, whatever the merits of the Liquidator's intentions.[35] I also note that the issues raised by the Liquidator broadened rather thannarrowed, as discussed above, particularly in the way in which the argumentconcerned potential rights of secured creditors. The Liquidator refers to what hemaintains is his role of oversight. In support of this he refers to Petterson v Gothard16 Re Osborne [2018] NZHC 546, 24 PRNZ 12.(No 3).17 The comments in that case, however, were in the context of the Liquidator'srole as against that of a receiver.[36] Therefore, I do question the Liquidator's interest in the proceedings anddiscuss this in more detail below, specifically when addressing the disclaimer of aninterest in the Property. The Liquidator's attempted intervention did add to the lengthof the proceeding, coming as it did after the hearing had closed. It also requiredadditional research by, and submissions from, Mr Michalik, again discussed in moredetail below. In light of these matters and considering the guidance of other casesdiscussed above, it is in my view appropriate to award costs against the Liquidator.Which category of costs is appropriate?[37] Having decided that the Liquidator is liable for costs, the next issue is the levelof those costs. 100 Investments applies for costs on an indemnity basis, with increasedcosts sought as an alternative. The application is on the basis that the Liquidator'sattempted intervention was so unnecessary it should never have been brought.Furthermore, that the Liquidator's actions were improper.Intervention obviously hopeless[38] Mr Michalik submits it should have been obvious to the Liquidator that issuesbetween mortgagees were not relevant to 100 Investments as a bona fide purchaser ofthe Property for value. In response to this, the Liquidator notes that the second rankingsecured creditor, via a trust to which its rights have been assigned, has been grantedan interim injunction preventing IAG from disbursing the full settlement sum to100 Investments on the basis it has an entitlement to sums in excess of the firstmortgagee's priority sum.18 That being so, there is clearly an arguable case, inMr Francis' submission on behalf of the Liquidator, and the Liquidator's approachcannot be considered obviously hopeless. I accept that proposition.17 Petterson v Gothard (No 3) [2012] NZHC 666 at [46]–[48].18 PVG Securities Trustee Ltd v IAG New Zealand Limited, above n 3.The Liquidator's disclaimer in respect of the Property[39] Of more import is Mr Michalik's submission that it was improper for theLiquidator to argue he should be involved in the proceedings in respect of insuranceproceeds involving the Property without disclosing to the Court that the Liquidator'spredecessor had disclaimed the Property in its entirety. This occurred in January 2011.[40] It comes as quite some surprise that the Liquidator did not inform the Court ofthis disclaimer. The subject of the proceedings was insurance proceeds in respect ofthe Property. It was a matter of significant relevance that the Liquidator haddisclaimed any interest in the Property. The Liquidator tries to absolve himself of anyresponsibility in this regard, disputing he had a duty of disclosure on the basis he wassimply seeking access to the Court documents. Further, he maintains that it wasreasonable to assume the information was already before the Court, particularly given100 Investments was claiming in the name of Lichfield and that the disclaimer inrespect of the Property did not necessarily impact on insurance rights.[41] At the first teleconference held following the Liquidator's attemptedintervention, it was made clear that the real basis of 100 Investments' claim was asowner of the Property as a result of the mortgagee sale. As noted in my judgment,19the ADLS standard form of mortgage includes an obligation on the mortgagor to insurethe property, as well as providing that the mortgagor assigns to the security holderabsolutely its rights in proceeds of insurance. The terms of the original liquidator'sdisclaimer included:On 22 December 2010 we disclaimed these assets as there was no equity norincome available for the creditors.[42] It was therefore clear that the Liquidator had no interest in the Property,including the insurance proceeds.[43] The Property suffered damage in the earthquakes of 4 September 2010,26 December 2010 and 22 February 2011, and was not demolished until March 2012.The original liquidator had therefore disclaimed any interest in the Property two years19 100 Investments Limited v IAG New Zealand Limited, above n 2, at [35].prior to its demolition and after the first earthquake damage, the cost of which wasestimated at only $206,140.20 The Liquidator cannot possibly, therefore, have had anyinterest in the insurance proceeds.[44] That was a material fact which should have been brought to the Court'sattention.Steps covered[45] In Mr Michalik's submission, the Liquidator should also be responsible for thecosts incurred by 100 Investments in attending and arguing the formal proof hearing.In his submission, "[i]t is now evident that the [L]iquidator's unjustifiable claimssignificantly influenced [IAG] in its reluctance to confirm a "clean" settlement withoutinvolving the Court". Mr Michalik refers to the Liquidator's "behind the scenescampaign" which led to the need for a formal proof hearing. He points out that, priorto the hearing, the Liquidator chose to limit his attempts to become involved bycorresponding only with IAG and not revealing any claim to an interest to either100 Investments or the Court. It was only once the hearing had concluded that theLiquidator then attempted to intervene.[46] Mr Michalik submits that, if the Liquidator's claim had been made openly atan earlier stage, the issue could have been resolved and the parties saved the costs ofa formal proof hearing. He also says that the lateness of the Liquidator's attemptedintervention deprived 100 Investments of the chance to obtain security for costs byway of a Calderbank letter.[47] In submissions in reply, Mr Francis objects to these allegations, saying they arebaseless. Mr Francis says the Liquidator simply requested that IAG provided relevantinformation. Further, in Mr Francis' submission, increased or indemnity costs areawarded to reflect parties' conduct in a proceeding, not to punish or reward conductbefore becoming involved.20 GST exclusive.[48] Mr Michalik also raises an issue as to the Liquidator's attempt to explain hismotivation, at least in part by what he describes as "concerns" about Mr DavidHenderson. Mr Michalik points out that Mr Henderson is neither a shareholder nordirector of 100 Investments and suggests the Liquidator has embarked on somethingof a campaign against Mr Henderson personally. This amounts, in his submission, tobad faith.[49] The Liquidator's response is to point out that Mr Henderson was a formerdirector of Lichfield and its parent company and other entities in the group and "isassociated" with 100 Investments. He notes there are separate proceedings wherebyMr Henderson and others have applied to have the Liquidator removed as liquidatorof Lichfield and several other companies. He submits these issues will appropriatelybe resolved in those separate proceedings.[50] I have no knowledge of the separate proceedings or any detailed knowledge ofMr Henderson. As such, I put the Liquidator's submissions about Mr Henderson toone side when he first raised them and continue with that approach.[51] A total of $6,746, excluding GST, is claimed in respect of costs for the formalproof hearing. Pursuant to the settlement agreement, 100 Investments and IAG eachagreed to bear their own costs. The Liquidator says, as he was neither involved in norparty to the formal proof, nor provided with the papers, nor given an opportunity to beheard, there is no authority which could justify costs being awarded against theLiquidator in respect of the formal proof hearing. I agree.[52] It cannot be more than speculation to say that the Liquidator influenced IAGin respect of the settlement. I also note that 100 Investments and IAG asked the Courtto approve and make orders in connection with the terms of settlement. That includedasking the Court to confirm 100 Investments' entitlement to the insurance proceeds.In the absence of evidence, I was not prepared to make that order and a formal proofhearing was required.[53] For these reasons, 100 Investments is not entitled to costs against theLiquidator in connection with the formal proof hearing.Role of the Liquidator[54] Mr Michalik submits that any oversight role the Liquidator might have cannotbe allowed to become an excuse for him to seek to involve himself in matters whichcannot benefit those whom it is the Liquidator's duty to represent – the unsecuredcreditors and shareholders of Lichfield. He submits that, to allow the Liquidator topursue issues affecting only secured creditors when those secured creditors have notpursued those issues themselves, risks converting the Liquidator's potential oversightrole into "an excuse to churn fees at the expense of the general body of unsecuredcreditors, through involving himself in additional litigation, where that additionallitigation cannot result in any advantage to that general body of unsecured creditors,although they will inevitably bear the expense ".[55] I have already briefly referred to the Liquidator's claim of having a generaloversight role. A costs decision, in the absence of detailed submissions on this aspect,is not the appropriate forum for an analysis of a liquidator's duties. I therefore confinemyself to the observations made already on this aspect, made even more relevant giventhe disclaimer of the Property.Consent to use of the name of Lichfield[56] Mr Michalik notes the issues first raised by the Liquidator in his letter of8 November 2018 to IAG included the submission that the Liquidator had the right tocontrol the use of the name of Lichfield in litigation and he should have been givennotice of the proceeding involving its name. He then points out that that matter wasnot pursued.[57] The Liquidator stresses what he says is a clear and understandable interest inthe use of Lichfield's name to recover sums potentially owing to it. He refers to100 Investments' alternative claim that it was entitled to sue on Lichfield's rights andtherefore in its name, thereby engaging s 248 of the Companies Act.[58] Mr Michalik submits that s 248(1)(c) of the Companies Act applies to ensurethat a liquidator's consent or leave of the Court is required to commence or continuelegal proceedings "in relation to the property of the company". He then says, giventhe Liquidator's disclaimer of the Property, no consent or leave was in fact required.[59] Mr Michalik points to authority to the effect that a receiver appointed by asecurity holder who takes action in the name of a company to realise its security hasbeen held to be taking action in respect of the security-holder's own secured property.The receiver continues to enjoy the power to litigate in the company's name as a meansof enforcing the rights of a secured creditor but, unless an order in respect of thelitigation has been obtained, any liabilities incurred are claimable as against thereceiver rather than the company.21[60] As with my observations on the role of a liquidator, this is not the appropriateforum for a detailed analysis of the effect of s 248 of the Companies Act. It can fairlybe said that a liquidator would want to know about any litigation commenced in thename of the company in liquidation. The question, though, is whether, having receivedappropriate information, the Liquidator should have pursued his concerns. In thecircumstances as discussed, I am not satisfied he should have.Indemnity or increased costs?[61] The Liquidator claims any costs should be on a 2B basis for the steps ofattendance at a (less than) 30-minute judicial telephone conference on 15 November2018 and filing a four page memorandum dated 26 November 2018. This wouldamount to $1,338.00.[62] I have outlined my concerns about the approach of the Liquidator in this case.The test for indemnity costs requires a person to have acted "vexatiously, frivolously,improperly, or unnecessarily".22 This requirement is informed by the case law whichgenerally involves a level of what might be described as outrageous or egregiousconduct, for example unsupported allegations of fraud, wilfully disregarding knownfacts or clearly established law.23 I am not satisfied the Liquidator's actions met this21 Sowman v David Samuel Trust Limited [1978] 1 All ER 616 (Ch) and Peter Blanchard and MichaelGedye The Law of Private Receivers of Companies in New Zealand (3rd ed, LexisNexis,Wellington, 2008).22 High Court Rules 2016, r 14.6(4)(a).23 Bradbury v Westpac Banking Corp, above n 7, at [29].test. In saying this, the Liquidator claims his intervention was only to seek access torelevant facts, evidence and submissions. That might have been the case initially butthe memorandum of 20 November 2018 did significantly more than that, as alreadydiscussed.[63] While indemnity costs are not appropriate, I am of the view that increased costsare appropriate. The reasons for this include that the intervention took place after thehearing, the fact the Liquidator had disclaimed an interest in the Property before thedemolition of the buildings but did not reveal this to the Court, and that the real focusof the Liquidator's submissions sought to protect the interests of secured creditors.That was a failure to act reasonably.[64] 100 Investments says its costs in respect of the Liquidator's intervention total$9,900 excluding GST. It also seeks $3,825 excluding GST in connection with theapplication for costs.[65] The Court has a discretion to award costs in relation to the preparation ofmemoranda in support of costs.24[66] The Liquidator criticises the costs incurred by 100 Investments as plainlyexcessive and not relating to any hearing before the Court. In his initial memorandum,Mr Michalik had incorrectly referred to 22 hours of preparation, travel and attendancefor a one day hearing. He explained in a later memorandum that that was incorrectand an error made as a result of copying and pasting a previous entry. He confirmed,however, that the application was for 22 hours' preparation and attendance time. I amnot persuaded that this was excessive. Mr Michalik explains that: The time spent arises from the need to understand what was going on,advise the client, take instructions, prepare the 3 memoranda filed on behalfof [100 Investments] (two before and one following the telephone hearing)and to prepare for and appear at the telephone hearing itself.[67] Mr Michalik notes that the steps required as a result of the Liquidator'sattempted intervention were unique to this matter. I consider that a fair observation.24 Harley v Registrar-General of Land HC Wellington CIV-2009-485-2167, 23 September 2010at [6]; and Bloor v IAG New Zealand Ltd HC Rotorua CIV-2004-463-425, 3 February 2011 at [29].[68] The matters raised by the Liquidator changed during the course of hisattempted intervention and, I accept, would have required a considerable amount ofwork by counsel. This occurred after having been somewhat blindsided by theLiquidator's approach. Given the formal proof hearing had already taken place, andgiven the amount at stake, counsel would have been required to research thoroughlyand address the issues raised by the Liquidator. In those circumstances, I do notconsider 22 hours excessive. The application for costs was as a consequence of theLiquidator's unexpected attempt to intervene. As is evident from the submissions,Mr Michalik put quite some effort into them, including addressing the Liquidator'sdisclaimer of the Property, researching personal liability for costs of a liquidator, aswell as the law around the power to conduct legal proceedings during a liquidation. Itake all of this into account when assessing the level of increased costs.[69] Increased costs are warranted when there is a failure by the paying party to actreasonably. As already articulated, I do not consider the Liquidator acted reasonablyin this matter. Costs of $8,000 excluding GST are awarded to 100 Investments.Result[70] For the reasons given, costs of $8,000 excluding GST are awarded to 100Investments.Thomas JSolicitors:Canterbury Legal, Christchurch for PlaintiffYoung Hunter, Christchurch for DefendantMeredith Connell, Auckland for Liquidator