INTERNATIONAL DIRECT LIMITED (IN LIQUIDATION) HC WN CIV-2006-485-002020

INTERNATIONAL DIRECT LIMITED (IN LIQUIDATION) HC WN CIV-2006-485-002020 29 May 2007IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV-2006-485-002020IN THE MATTER OF the Companies Act 1993 AND IN THE MATTER OF an Application pursuant to s266 for production of records by AND INTERNATIONAL DIRECT LIMITED (IN LIQUIDATION) Defendant Judgment: 29 May 2007 at 4 p.m. In accordance with r540(4) I direct the Registrar to endorse this judgment with a delivery time of 4.00 p.m. on the 29 th day of May 2007.JUDGMENT OF ASSOCIATE JUDGE D I GENDALL As to Costs[1] In my judgment dated 9 March 2007 issued in this proceeding, I ordered costs and disbursements to the liquidator of International Direct Limited (in Liquidation) against Mr Michael Hebden Bennett (Mr Bennett) and Ms Deidre Watson (Ms Watson). Costs were awarded on a category 2B basis. [2] With respect to the issue of quantum of those 2B costs, in my 9 March 2007 judgment I noted that neither Mr Bennett nor Ms Watson had responded to a schedule of costs which counsel for the liquidator had attached to his submission. [3] Directions were therefore given (at paragraphs [22] and [34]) that both Mr Bennett and Ms Watson were to have an opportunity to respond by memorandum with regard to this quantum issue.[4] On 21 March 2007 counsel for Ms Watson filed his memorandum in relation to the quantum issue, and on 26 March 2007 counsel for Mr Bennett filed his memorandum on this question. [5] In response, as directed by me on 28 March 2007, counsel for the liquidator has filed his memorandum dated 13 April 2007 on this costs issue. [6] I have had an opportunity to consider the various memoranda filed, and now give my decision on this disputed quantum issue. [7] The category 2B costs sought by the liquidator against Mr Bennett are noted at paragraph [15] of a memorandum dated 23 February 2007 from counsel for the liquidator. The total scale 2B costs are noted at 9.1 days based on $1600.00 per day, totalling $14,560.00. Disbursements, being a service agent's fee of $225.00, are also sought. [8] The category 2B costs sought against Ms Watson are also noted at paragraph [15] of the 23 February 2007 memorandum from counsel for the liquidator. These are calculated at 7.6 days based on $1600.00 per day and total $12,160.00. Disbursements, being a service agent's fee of $112.50, are also sought. [9] A breakdown of the calculation of these costs is set out in this 23 February 2007 memorandum. Counsel for Mr Bennett and Ms Watson take issue with a number of items claimed for costs by the liquidator. I will now consider each of these in turn.Item 3[10] In Item 3, counsel for the liquidator seeks costs for 2.5 days for preparing an affidavit in support of his originating application. He indicates this is pursuant to item 7.1 in schedule 3 to the High Court Rules. As to this, counsel for Ms Watson notes that the liquidator filed one affidavit in support of the application which was two and a half pages long without exhibits. He comments that the affidavit is unlikely to have taken counsel of average skill and experience two and a half days to prepare, particularly given that the liquidator also claims an allocation of three daysfor the commencement of the proceeding. Under the circumstances, counsel for Ms Watson submits that 0.5 days would be a proper allowance for the preparation of this affidavit. [11] In my view there is substance in these contentions. I take the view that 0.5 days for preparation of this affidavit would be an appropriate allowance. [12] This Item 3 in the liquidator's claims for costs against Ms Watson is now to be 0.5 days, in place of the 2.5 days claimed. A similar amount is approved for completion of the affidavit in support with respect to the application against Mr Bennett.Items 4 and 5[13] In Items 4 and 5, counsel for the liquidator claims against Ms Watson one full day for preparation for the hearing on 14 November 2006, and 0.5 days for appearance at the hearing on that date. The same allocations are claimed against Mr Bennett. [14] Counsel for Ms Watson takes issue with this. He notes that the applications against Mr Bennett and Ms Watson were both heard in the half-day fixture on 14 November 2006. By claiming an allocation of half a day from each party, counsel for both Ms Watson and Mr Bennett suggest that the liquidator is effectively "double-dipping" by recovering a total allocation of one day for appearing at a half- day hearing. He submits, therefore, that only 0.25 days should be awarded against Ms Watson and 0.25 days against Mr Bennett for the 14 November 2006 hearing, with 0.5 days allocated for preparation for this hearing against Ms Watson and also against Mr Bennett. [15] In his memorandum dated 13 April 2007, counsel for the liquidator accepted that the liquidator cannot claim the same time twice for the hearing. An adjustment to the schedule, as requested by counsel for Ms Watson and Mr Bennett, to record a total one half-day allowance for the hearing, and one day of preparation time sharedbetween Mr Bennett and Ms Watson was accepted as appropriate. These changes to Items 4 and 5 are to be made.The Service Agent's fee[16] In the memorandum from counsel for Ms Watson, objection is taken to the liquidator's claim for $112.50 as a disbursement for a service agent's fee. No similar objection, however, appears to be taken by Mr Bennett to the $225 service agent's fee charged as a disbursement to him. [17] On her behalf, counsel for Ms Watson states that despite having been in regular contact before the proceedings were issued, neither the liquidator nor counsel for the liquidator advised Ms Watson that the proceedings had been filed. Accordingly it is contended that Ms Watson was never given the opportunity of accepting service by post or facsimile. [18] Counsel for Ms Watson contends that personal service of Ms Watson was not "necessary" as required by r48H High Court Rules, and accordingly the service agent's fee should not be awarded as a disbursement. [19] In response, counsel for the liquidator notes first that on 9 October 2006 an order was made that the application to produce documents was to be served on Ms Watson, and secondly that service was effected in compliance with the order and r197 High Court Rules. [20] Accordingly, counsel for the liquidator submits that the service fee was properly incurred, and this fee should be reimbursed. [21] This proceeding has a reasonably long and unfortunate history. As I see it, service of the proceedings on Ms Watson was required, and it was appropriate for service to be effected pursuant to r197 High Court Rules. [22] In terms of r48H, I am satisfied that the agent's service fee was a proper expense for "serving documents for the purposes of the proceeding", and that interms of r48H(2) it was a "necessary" disbursement for the conduct of this proceeding. [23] The service agent's fee disbursement of $112.50 is to be awarded.Category 2B or Category 1A?[24] So far as the memorandum filed by counsel for Mr Bennett is concerned, an additional matter he raises is the claim that costs in this matter should be awarded at the lowest end on a category 1A basis, rather than on a category 2B basis. His justification for this contention is that the application was made under mechanical provisions of the Companies Act 1993 in a situation where he contends Mr Bennett had "simply agreed he would appear". He goes on to contend that the liquidator misled all parties, and the Court, as to whether he had received any contact from Mr Bennett in the first place. [25] As to these matters, there is no doubt that in this Court Mr Bennett at first objected to the jurisdiction of the New Zealand Court to deal with the liquidator's application. It was only when that argument failed that he was then given the opportunity to file a further affidavit, in which he consented to being examined. I therefore reject the claim that the application was not necessary as Mr Bennett "agreed he would appear". [26] The liquidator was clearly faced with the need for an application and hearing given this approach by Mr Bennett. Further, there is nothing before the Court to support the suggestion (denied by the liquidator) that he misled the parties nd the Court over the issue of contact with Mr Bennett. Costs which were awarded against Mr Bennett on a category 2B basis are therefore appropriately awarded here on that category 2B level. Category 1A is not appropriate.Paragraph 7.1[27] Next, counsel for Mr Bennett appeared to take issue with item 3 which related to paragraph 7.1 of schedule 3. This is the liquidator's claim against Mr Bennett for 2.5 days for an affidavit in support of the originating application. Unlikethe approach taken by counsel for Ms Watson (noted at paragraph [10] above), counsel for Mr Bennett contended that no allowance at all should be made for this, as it is subsumed in preparation of the interlocutory application itself. [28] I reject this suggestion. In my view it is appropriate for an amount for costs to be allowed for preparation of the liquidator's affidavit in support. It is provided for in paragraph 7.1 of schedule 3. As noted above, in paragraph [12] the amount for preparation of this affidavit, however, is to be 0.5 days.Costs for Unsuccessful s261(5) Companies Act Application[29] One final matter requires mention. Counsel for the liquidator notes in his memorandum dated 13 April 2007 that since the preparation of the original costs schedule filed on 23 February 2007, Ms Watson has failed in her application for costs under s261(5) Companies Act 1993. He refers to the fact that a Notice of Opposition was filed on behalf of the liquidator on 23 February 2007. Therefore the liquidator seeks $960.00 costs against Ms Watson in respect of this failed application on the following basis:Schedule 3 reference 4.13 Description – preparing and filing opposition to application for costs under s261(5) Companies Act – 0.6 day 0.6 days at $1600 per day = $960.00[30] It is clear from paragraph [53] of my judgment in this matter dated 9 March 2007 that Ms Watson's application for costs/remuneration under s261(5) Companies Act 1993 was rejected. This application was strenuously opposed by the liquidator. In my view, the liquidator is therefore entitled to an order for costs against Ms Watson with respect to this application. The 0.6 day sought, pursuant to paragraph 4.13 of schedule 3 totalling $960.00 is appropriate here. This costs award is to be included in the order which will follow. [31] For all the reasons outlined above, quantum is set on the following basis and orders for costs and disbursements are now made in favour of the liquidator:a) against Michael Hebden Bennett, for $10,385.00 total, calculated as follows;Item No. Schedule 3 Reference Description Days1. 4.12 Ex parté interlocutory application for leave to commence proceedings by way of originating application – 8 September 2006 0.6 2. 1 Commencement of proceeding by originating application – 19 October 2006 3.0 3. 7.1 Affidavit in support of originating application – 31 August 2006 0.5 4. 8 Preparation for hearing (¼ day x2) 0.5 5. 9 Appearance at hearing on 14 November 2006 0.25 6. 8 Preparation for Second hearing (½ day x2) 1.0 7. 9 Appearance at hearing on 5 December 2006 0.5Total Days 6.35Scale 2B – 6.35 days @ $1600.00 per day = $10,160.00 Disbursement: service agent's fee $ 225.00 ------------- $10,385.00 ------------- b) against Deidre Watson, for $8832.50 total, calculated as follows;Item No. Schedule 3 Reference Description Days1. 4.12 Ex parté interlocutory application for leave to commence proceedings by way of originating application – 8 September 2006 0.6 2. 1 Commencement of proceeding by originating application – 19 October 2006 3.0 3. 7.1 Affidavit in support of originating application – 31 August 2006 0.5 4. 8 Preparation for hearing (¼ day x2) 0.5 5. 9 Appearance at hearing on 14 November 2006 0.25 6. 4.13 Preparing and filing opposition to s261(5) Companies Act 1993 costs application 0.6Total Days 5.45Scale 2B – 5.45 days @ $1600.00 per day = $8720.00 Disbursement: service agent's fee $ 112.50 ----------- $8832.50 ----------- ________________________________Associate Judge D.I. GendallSolicitors:Tripe Matthews & Feist, Wellington for Liquidator Mr Walker McDonald Pilcher Partnership, Auckland for Mr Bennett and Ms Watson