SHORT ENZ PRODUCTIONS LTD (IN LIQUIDATION) V HE TAONGA PROPERTIES LTD HC AK CIV 2006-404-2253

SHORT ENZ PRODUCTIONS LTD (IN LIQUIDATION) V HE TAONGA PROPERTIES LTD HC AK CIV 2006-404-2253 15 December 2006IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2006-404-2253UNDER the Companies Act 1993 IN THE MATTER OF the liquidation of SHORT ENZ PRODUCTIONS LIMITED (in liquidation) BETWEEN HENRY DAVID LEVIN AND BARRY PHILLIP JORDAN AS LIQUIDATORS OF SHORT ENZ PRODUCTIONS LIMITED (IN LIQUIDATION) Plaintiffs AND HE TAONGA PROPERTIES LIMITED Defendant Hearing: By memoranda Appearances: D. Hughes & M. Broad for Plaintiffs G. Keene for Defendant Judgment: 15 December 2006 at 4pmCOST JUDGMENT OF ASSOCIATE JUDGE D.H. ABBOTTIn accordance with R540(4) I direct that the Registrar endorse this judgment with the delivery time of 4pm on 15 December 2006Solicitors: Kensington Swan, Private Bag 92101, Auckland Graeme Skeates, 5 Maidstone Street, Ponsonby, Auckland[1] On 2 November 2006 I gave an oral judgment dismissing the plaintiffs' application for liquidation of the defendant. Although declining their application for liquidation, I made an order granting the plaintiffs' costs on that application. The following are my reasons for making that order (at paragraph [23] of the earlier judgment):[23] The liquidators have been put to this application as a consequence of the disarray in the accounts of both Short Enz and the defendant. If those accounts were in reasonable order, I would have expected that the matter could have been dealt with at an early stage. If the defendant had taken steps to oppose the statutory demand, this application, in my view, would also have been avoided. If the defendant had put forward proper evidence to support its solvency at the outset, I consider that it is also likely that that would have been an end of the application. The defendant has had time given to it to try to address these matters. The fact that it has not done so seems attributable to the parlous state of its records and administration. On that basis, I consider it only reasonable to award the plaintiffs costs (particularly in light of the fact that the real issue, whether or not there is still a debt due to the plaintiffs has not been resolved, and the plaintiffs may yet have to come back to this Court).[2] The costs order included an order for payment of disbursements as fixed by the Registrar. The plaintiffs have filed an order for sealing which includes a disbursement of $1,265.63 for the costs of an expert accountant, Mr R.S. Innes-Jones (a partner of the chartered accountancy firm BDO Spicers). He swore an affidavit in which he addressed an issue over changes made to the accounts of both Short Enz Productions Limited (in liquidation) (for whom the plaintiffs are liquidators) and the defendant (these two companies are related). [3] Counsel for the defendant has filed a memorandum disputing the plaintiffs' claim to be paid that disbursement. He argues that it was not material to the decision, and that that should have been apparent to the plaintiffs prior to requesting preparation of the affidavit. [4] Counsel for the plaintiff liquidators has filed a memorandum in support of their claim for the costs of their expert witness. They argue that the costs should be approved as the affidavit was specific to the proceeding, necessary for its conduct, and a reasonable amount. Counsel relies on The Beach Road Preservation Society Inc v Whangarei District Council (2001) 16 PRNZ 13 where this Court approved asrecoverable fees paid to experts notwithstanding that the evidence, considered in hindsight, provided little assistance to the decision made. The Court approved those costs because the testimony was obtained reasonably and in good faith. [5] The Court has a discretion under r 48H of the High Court Rules to order payment of witnesses' expenses as disbursements. In terms of r 48H(2)(a)(i) it is well accepted that they are of a class which the Court can approve: see Progressive Enterprises Ltd v North Shore City Council (2005) 17 PRNZ 919. I am satisfied that the costs being claimed are specific to the conduct of the proceeding, and reasonable in amount: R 48H(2)(b) and (d). The issue is whether the cost was necessary for the conduct of the proceeding: R 48H(2)(c). [6] The defendant advanced its case on two grounds. The first was that there was a genuine dispute as to whether or not the sum on which the application for liquidation was based, was owing. The second was that the defendant was insolvent. I was able to decide the case without having to take into account the point being made by the plaintiffs' expert (that changes purportedly made to the accounts were of no legal effect). [7] I awarded costs to the plaintiffs because I took the view that the application for liquidation would have been avoided had the defendant not delayed in taking steps particularly in relation to providing evidence of solvency. However, that does not stop an assessment being made as to whether this disbursement was reasonably incurred. [8] Whilst I accepted the thesis underlying Mr Innes-Jones' evidence, it was not material to the decision reached. I was satisfied on the evidence before me that there was a genuine dispute and that the defendant was solvent. I accepted that the changes purportedly made to the accounts were evidence of a dispute having arisen some time earlier than the issue of the demand and the filing of the liquidation proceeding.[9] The argument being advanced by counsel for the defendant is essentially the same as that put forward by the parties opposing costs in The Beach Road Preservation Society Inc v Whangarei District Council, namely that the evidence proved to be irrelevant. I adopt, with respect, the reasoning of Chambers J in that case (at para [18] ) in saying that I do not consider this to be reason to reject the claim in this case:I reject that submission. It may be true that on the basis upon which I decided this case, these experts' evidence provided little assistance. It is often the case, with the benefit of hindsight, that parties appreciate that a particular witness was unnecessary. In this case, the society advanced its argument on a number of fronts. This expert evidence was relevant to some of the arguments advanced. The fact that I did not feel it necessary to determine all the arguments advanced should not deprive the society of costs in respect of these expert witnesses, whose testimony was obtained reasonably and in good faith.[10] The evidence of Mr Innes-Jones was directed towards a potential argument by the defendant (that the accounts demonstrated that the debt was not owing). The plaintiffs were entitled to respond to the evidence put forward by the defendant in support of that proposition. It was a reasonable position to take. The evidence was also not entirely without assistance to the Court in that counsel for the defendant was able to use it to advance a submission that was ultimately accepted (I refer to paragraph [17] of my judgment). Finally, I consider that an order in respect of this disbursement is in keeping with the general approach behind my decision to award costs to the plaintiffs notwithstanding that liquidation was not ordered, namely that the costs would not have been necessary had the defendant not delayed. [11] There is one further aspect to the matter which I must also address in the exercise of my discretion. That is whether or not to allow the full amount of the claim. In the circumstances of the present case, I consider it appropriate to follow the course taken in Glaister v Amalgamated Dairies Ltd (2003) 16 PRNZ 536 andProgressive Enterprises Ltd v North Shore City Council and allow two-thirds recovery of the fees rendered.Decision[12] I approve the costs of the plaintiffs' expert witness as a disbursement in this proceeding, and allow two-thirds of that fee as the appropriate sum to be reimbursed. ____________________________Associate Judge D.H. Abbott