WEALAND INTERNATIONAL (NZ) LTD V SAFE KIDS IN DAILY SUPERVISION LTD HC AK CIV-2008-404-004658

WEALAND INTERNATIONAL (NZ) LTD V SAFE KIDS IN DAILY SUPERVISION LTD HC AK CIV- 2008-404-004658 24 February 2009IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2008-404-004658UNDER Section 290 of the Companies Act 1993 IN THE MATTER OF an application to set aside a statutory demand BETWEEN WEALAND INTERNATIONAL (NZ) LIMITED Applicant AND SAFE KIDS IN DAILY SUPERVISION LIMITED Respondent Hearing: Determined on the papers Judgment: 24 February 2009 at 3:00 pmJUDGMENT OF ASHER J [COSTS]This judgment was delivered by me on 24 February 2009 at 3:00 pm pursuant to Rule 11.5 of the High Court Rules .. Registrar/Deputy Registrar .. DateSolicitors: Hucker & Associates, PO Box 3843, Shortland Street, Auckland Holmes Dangen & Associates, PO Box 3600, Auckland Copy: L Gerrard, Haydens Law Ltd, PO Box 108170, Symonds Street, AucklandPreliminary[1] Wealand International (NZ) Limited ("Wealand") has successfully pursued an application setting aside a statutory demand issued under the Companies Act 1993 by the respondent, Safe Kids in Daily Supervision Limited ("Safe Kids"). In a judgment of 3 December 2008 I set the statutory demand aside under s 290(4)(a) of the Companies Act 1993. Safe Kids was pursuing a claim based on a contract to pay $15,000 for the provision of an employee to Wealand. [2] Wealand now seeks costs on a category 2B basis for all steps taken from 6 November 2008, and for indemnity costs for the period from 6 November 2008 onwards. This period includes the time for preparation for hearing and the hearing itself. The basis for seeking indemnity costs is that Wealand issued a Calderbankletter, which was not accepted by Safe Kids. The total amount claimed for costs is $10,432.50. Costs on a 2B basis would be $5,600. [3] I consider that category 2 is the appropriate categorisation of the proceedings in terms of r 14.3 of the High Court Rules. While the amount involved was small and the essential proceedings straightforward, the factual and legal issues that arose were not simple, and take the proceedings beyond category 1. They were proceedings requiring counsel of skill and experience considered average in the High Court in terms of that rule. [4] However, given the simple issues Band A is the correct time band. I note that this band was applied in relation to the statutory demand application in International Airline Training (NZ) Limited v Rohlig New Zealand Limited HC AK CIV-2003- 404-3464 23 February 2004, Master Faire. [5] The Calderbank letter that was sent on 6 November 2008 contained an offer by Wealand to settle the entire proceedings on the basis of a payment by Wealand to Safe Kids of $5,000. The relevance of Calderbank offers to the assessment of costs is recognised both in r 14.6(3)(v) and r 14.10 of the High Court Rules. Rule 14G recognises that written offers without prejudice except as to costs can be made and must not be communicated to the Court. Rule 14.6(3)(b)(v) is the more substantiverule in that it refers to the refusal to accept the offer as being a basis for ordering increased costs if the refusal has contributed unnecessarily to the time or expense of the proceeding.14.6 Increased costs and indemnity costs (3) The court may order a party to pay increased costs if— (b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by— (v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or[6] The offer in the letter of 6 November 2008 was to settle the whole proceeding, and did not make an offer which turned on the withdrawal of the statutory demand. Rather, it was an offer in full and final settlement of the claim itself. Accordingly its acceptance required more than just a withdrawal of the statutory notice. Safe Kids required a full compromise of the claim itself. They were being asked to settle for $5,000 rather than the $15,000 claimed.Calderbank offers[7] The essence of a Calderbank offer as expressed in the original case (Calderbank v Calderbank [1975] 3 All ER 333), is that if a party makes an offer that turns out to be more beneficial than the judgment ultimately achieved by the party who receives the offer, the offeror may claim costs as if it had been successful in the litigation. [8] The reason why in fairness there should be increased costs as r 14.6(3)(b)(v) indicates, is that the failure without "reasonable justification" to accept the offer has led unnecessarily to an increase in time and expense. Thus where, for example, an offer is made to settle a case for $10,000 and the ultimate judgment is $5,000, the principle will generally apply.[9] However, the situation here was different. What was offered was something which required more than a withdrawal of the existing proceeding, which concerned only the issue of whether there was a substantial dispute in terms of s 290(4)(a) of the Companies Act 1993. Rather, this offer required a settlement of the entire claim. [10] It is not possible for the Court in this proceeding to determine whether it was reasonable or unreasonable of Safe Kids to reject that offer. All that the judgment has determined is that there is a substantial dispute, not that Safe Kids are unable to recover the $15,000 from Wealand. Safe Kids may ultimately succeed in its claim. Thus, it is not established that Safe Kids was unreasonable in rejecting the offer to settle for a payment of effectively only one-third of its claim. It may well have had a reasonable justification for doing so, and be ultimately vindicated. [11] For these reasons Wealand has not established that the Calderbank letter was unreasonably rejected, and that this rejection has contributed unnecessarily to the time or expense of the proceeding. [12] I therefore approach the matter on the basis that costs on a 2A basis are appropriate. From those costs some deduction is appropriate for the four-day delay by the applicant filing its submissions in breach of the timetable directions. This meant that the submissions of the applicant were only filed on the day before the hearing, and the respondent had a very constrained time to reply. There is also some deduction that must be taken into account for this unsuccessful request for indemnity costs based on the Calderbank letter. It has taken the respondent extra legal time to respond. [13] In the circumstances I consider that a $750 deduction from the usual costs is appropriate.Result[14] Costs are awarded in favour of Wealand International (NZ) Limited on a 2A basis, together with reasonable disbursements. From those costs the sum of $750 isto be deducted. Therefore, the net amount payable will be costs on a 2A basis, plus disbursements, less $750.. Asher J