BODY CORPORATE 172108 v MANCHESTER SECURITIES LIMITED (in liquidation) [2021] NZHC 1852

BODY CORPORATE 172108 v MANCHESTER SECURITIES LIMITED (in liquidation) [2021] NZHC 1852[29 July 2021]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2018-485-225[2021] NZHC 1852UNDER the Companies Act 1993BETWEEN BODY CORPORATE 172108PlaintiffAND MANCHESTER SECURITIES LIMITED(in liquidation)DefendantHearing: On the papersAppearances: J B Orpin-Dowell for plaintiffK Sullivan for defendantJudgment: 29 July 2021JUDGMENT OF ASSOCIATE JUDGE JOHNSTON[COSTS][1] On the application of the plaintiff, Body Corporate 172108, in a judgmentoriginally issued on 19 and then reissued on 28 February 2020, I made an orderwinding up the defendant, Manchester Securities Ltd.1 Following an unsuccessfulappeal by Mr R J Cummins, formerly the sole shareholder and director ofManchester Securities, to the Court of Appeal,2 the Body Corporate applied for costsin the High Court proceedings. Costs were sought not only againstManchester Securities but also against Mr Cummins who had taken an active part inthe 10 December 2019 hearing of the substantive application (and the appeal thatfollowed). In a judgment issued on 30 June 2021 I made a costs award in favour of1 Body Corporate 172108 v Manchester Securities Ltd [2020] NZHC 198.2 Cummins v Body Corporate 172108 [2021] NZCA 145.the Body Corporate against Manchester Securities and Mr Cummins jointly.3 Theconcluding paragraph of my judgment read as follows:[11] I award the plaintiff costs against the defendant and Mr Cumminsjointly. Those costs are to be calculated on a 2B basis. The costs, along withany relevant disbursements, may be fixed by the Registrar.[2] I had expected that counsel would engage cooperatively to resolve any issuesthat might arise in relation to the scope and quantum of costs, and present an agreedcosts order to the Registrar for sealing. However, it is apparent that that did nothappen, and the Court now has before it a further exchange of memoranda fromcounsel (four in total) in which they seek a determination of these matters.[3] The starting point is the scope of the Body Corporate's costs claim. TheBody Corporate commenced this proceeding in late 2018 (there had been an earlierchallenge to the statutory demand served by the Body Corporate that was the subjectof an application to set aside in this Court and an appeal to the Court of Appeal).Manchester Securities applied for a stay. I dismissed that application in a judgmentdated 14 December 2018.4 The Body Corporate sought costs and I awarded actual andreasonable costs in its favour against Manchester Securities in a judgment dated25 February 2019.5 Manchester Securities then applied for leave to appeal against my14 December 2018 judgment refusing a stay. I granted such leave in a judgment dated25 March 2019.6 Manchester Securities appealed unsuccessfully against my14 December 2018 judgment to the Court of Appeal.7 After all that, theBody Corporate's substantive application for an order winding upManchester Securities came on for hearing and, as already said, I dealt with that in my28 February 2020 judgment.8[4] The aspects of the litigation in this Court in respect of which costs have notalready been dealt with are Manchester Securities' successful application for leave toappeal against my 14 December 2018 judgment ("application for leave") and the3 Body Corporate 172108 v Manchester Securities Ltd (in liq) [2021] NZHC 1542.4 Body Corporate 172108 v Manchester Securities Ltd [2018] NZHC 3307.5 Body Corporate 172108 v Manchester Securities Ltd [2019] NZHC 253.6 Body Corporate 172108 v Manchester Securities Ltd [2019] NZHC 569.7 Manchester Securities Ltd v Body Corporate 172108 [2019] NZCA 408.8 Body Corporate 172108 v Manchester Securities Ltd, above n 1.Body Corporate's successful application for an order winding Manchester Securitiesup ("the substantive application"). The Body Corporate seeks costs in relation to bothof those applications.[5] In his memorandum of 8 July 2021 Mr Sullivan, who was not involved ascounsel at the time of the application for leave, but who appeared forManchester Securities in the substantive application (though not for Mr Cummins whopresented argument on his own behalf) and who now appears to be presentingargument in the interests of both Manchester Securities and Mr Cummins in relationto this costs application, raises a series of points against the Body Corporate's costsclaim.[6] Mr Sullivan submits that costs in relation to the application for leave "have notbeen awarded to the Body Corporate and cannot be claimed".[7] Given the convoluted background to this matter, and that the primary focus ofcounsel's initial exchange of memoranda concerning costs, and my judgment of30 June 2021, was the substantive hearing, that is an understandable submission.However, Mr Orpin-Dowell's submissions on behalf of the Body Corporate at thatstage certainly addressed costs in connection with both the application for leave andthe substantive application. He included schedules of costs in relation to both (as wellas a schedule of disbursements). Prima facie at least it appears to me that my judgmentof 30 June 2021 must be treated as having applied to both applications.[8] However, having said that, in my view it would be an injustice for costs to beawarded jointly against Manchester Securities and Mr Cummins in relation toapplication for leave, because it was not until well after that point in the litigation thatMr Cummins began actively to participate and thereby put himself in the position of aparty and exposed himself to a costs risk. As I recorded in my 30 June 2021 judgment,he only did so in the course of the substantive application.9[9] In those circumstances, it seems to me that substantial justice will be done ifany costs award in relation to the application for leave is against Manchester Securities9 Body Corporate 172108 v Manchester Securities Ltd (in liq, above n 3, at [1]–[2].only and the company and Mr Cummins are jointly liable for any award in relation tothe substantive application.[10] Mr Sullivan contends that as Manchester Securities was successful in obtainingleave to appeal, it might claim costs in relation to the application for leave,notwithstanding that the appeal to the Court of Appeal was unsuccessful, though hegoes on to suggest that the proper course is for costs in relation to the application forleave to be left to lie where they have fallen.[11] I do not accept that submission. Ultimately, the Body Corporate was successfulon the issue and the starting point is that as the successful party it should have its costsat each stage. In this regard, it is helpful, in determining which party is the successfulparty, to have regard to what the Court of Appeal said in awarding the Body Corporateindemnity costs:10 While leave to appeal was granted, the appeal was, as we have said, theexemplar of a collateral challenge to final decisions of this Court and an abuseof process.(footnote omitted)[12] The view I have reached is that the Body Corporate is entitled to a costs awardagainst Manchester Securities in relation to the application for leave.[13] That brings me to the substantive application in relation to which Mr Sullivanaccepts that costs have already been awarded to the Body Corporate againstManchester Securities and Mr Cummings jointly.[14] Mr Sullivan questions two components of the Body Corporate's claim, namelythe claim for costs in respect of second counsel and the disbursements incurred inengaging expert witnesses.[15] Insofar as the claim for second counsel is concerned, Mr Sullivan says that asyet second counsel has not been certified for.10 Manchester Securities Ltd v Body Corporate 172108, above n 7, at [39].[16] In Tao v Strata Title Administration Ltd Thomas J said:11[52] The approach to determining whether costs of second counsel shouldbe granted is always objective, and "is focused on the nature of the proceeding,not the actual counsel involved and how he or she or they choose to conductthe litigation".12 It was emphasised both in Nomoi Holdings Ltd and insubsequent cases, that there will usually need to be some unusual feature tothe litigation to warrant allowances for second counsel.13 However, inWholesale Distributors Ltd v Songle Ltd, it was noted that the applicant didnot need to show that the case was beyond the capabilities of the principalcounsel, so long as it was sufficiently complex to justify certification forsecond counsel.14[17] Whilst on its face this may appear to have been a straightforward proceedingfor an order winding up a company, it has an unusually complex background.Mr Allan, who is the Body Corporate's solicitor, and who appeared as second counselat the hearing, has been involved in this matter throughout, and the view I take is thatit was entirely appropriate for the Body Corporate to have Mr Allan in attendance. Icertify for and approve the costs and disbursements claimed in relation to Mr Allan'sinvolvement.[18] Turning to the expert fees, I can see no basis upon which the Body Corporatecould be criticised for seeking to support its case in this extremely hard-foughtlitigation by obtaining independent expert evidence on important points. I do notfollow Mr Sullivan's contention that because the evidence was in affidavit form, andthe experts did not give viva voce evidence, that that makes any difference to therecoverability of disbursements properly incurred by the Body Corporate in relationto those experts.[19] Ultimately, the question is one of proof and reasonableness.15[20] I am satisfied that the evidence establishes that the Body Corporate incurredcosts of $3,024.60 in engaging Mr Gray to give evidence as to progress of the works11 Tao v Strata Title Administration Ltd [2016] NZHC 1821.12 Nomoi Holdings Ltdv Elders Pastoral Holdings Ltd (2001) 15 PRNZ 155 (HC) at [26].13 Nomoi Holdings Ltdv Elders Pastoral Holdings Ltd, above n 12, at [19] and YXCBA DevelopmentsLtd v Auckland Council [2015] NZHC 2224 at [16].14 Wholesale Distributors Ltd v Songle Supermarket Ltd [2015] NZHC 809 at [8].15 See generally Air New Zealand Ltd v Commerce Commission [2007] NZCA 27, [2007] 2 NZLR494, (2007) 18 PRNZ 406.and $9,500.00 in engaging Mr Vance to express an expert view as to the financialposition of the company. I see no basis (evidential or legal) for concluding that thosecosts were unreasonable. I allow them.[21] For those reasons:(a) The plaintiff body corporate will have its costs in respect of theapplication for leave. This costs award is against the defendantcompany only. Costs are awarded on a 2B basis in the sum of$7,050.43. There are no disbursements.(b) The plaintiff body corporate will have its costs and disbursements inrespect of the substantive application for an order winding up thedefendant. This costs award is made against the defendant andMr R J Cummins jointly. Costs and disbursements are awarded on a2B basis in the sum of $15,184.35. I allow disbursements in the sumof $17,634.10.Associate Judge JohnstonSolicitors:Grove Darlow & Partners, Auckland for plaintiffCore Legal Ltd, Masterton for defendant