IN THE HIGH COURT OF NEW ZEALAND AUCKAND REGISTRY

CIV-2013-404-1284 [2015] NZHC 162

IN THE MATTER	of the Companies Act 1993	

BETWEEN	
AQUAFIRE AIRCONDITIONING & ELECTRICAL LIMITED
Applicant	

AND	
SHAOLIN HU Respondent	

On the papers		

Counsel:	
No appearance for applicant
AJ Woodhouse for respondent	

Judgment:	
13 February 2015	

JUDGMENT OF FAIRE J

This judgment was delivered by me on 13 February 2015 at 4 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:	Woodhouse Law, Auckland

R Sharples, via email

Aquafire Airconditioning & Electrical Limited v Hu [2015] NZHC 162 [13 February 2015]

[1]       This proceeding began as an application to set aside a statutory demand. The statutory demand was issued by the respondent.   The demand sought payment of
$17,036.40.

[2]       The application was struck out by Associate Judge Sargisson on 8 November

2013.  Her Honour noted the file that:

It is plain from what Mr Sharples said is that the company is struggling to pay this outstanding debt which is not in dispute.

[3]       Her Honour then made an order as to when the debt was to be paid by and listed the matter for call on 22 November 2013.

[4]       A  joint  memorandum  signed  by  the  director  of  the  applicant  and  the respondent’s counsel was filed in Court on 21 November 2013.  I reserved costs at that time, there being no appearance by the applicant.  I then ordered that if there was no agreement on costs by 13 December 2013, memorandum in support, opposition and reply should be filed.   Before leaving the matter, I record that the joint memorandum that had been signed by the respondent’s counsel and the director of the applicant noted that the respondent sought 2B costs of $7,562.00, whereas the applicant has asked that costs be reserved, to be dealt with following completion of the settlement.

[5]       The  respondent  has  filed  memoranda  and  has  sought  indemnity  costs. Counsel  has  calculated  that  2B costs  on  this  file amount  to  $7,562.00  and  has provided a schedule which gives the breakdown of that claim, which I have checked and it appears to be in order.  In addition, there are disbursements of $207.75 making the total claim based on 2B costs and disbursements of $7,769.75.

[6]       The  respondent,  however,  invites  the  Court  to  consider  indemnity  costs, which would require an order of $11,348.60, including GST.

The Court’s approach to applications for costs

[7]       Rule 14.1 gives the Court a discretion to order costs in relation to a step taken in a proceeding.  That discretion is generally to be exercised in accordance with the

specific Rules contained in rr 14.2-14.10.1   In Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt) Ltd it was said of the costs regime contained in what is now rr 14.2-14.10 that:2

there is a strong implication that a Court is to apply the regime in the absence of some reason to the contrary[.]

The test to be applied is entirely an objective and not a subjective one.   The only reference which  it is necessary to make towards actual costs is to be found in r 14.2(f), namely that an award of costs should not exceed the costs incurred by the party claiming the costs.3

[8]       It is unnecessary that I review the matters that are set out in r 14.2 in light of the positions adopted by the parties.  This is a Category 2 case and, to the extent that it is appropriate to deal with each step that was taken, Band B is the appropriate band.

[9]       Rule 14.6 sets out the circumstances where increased or indemnity costs can be awarded.

[10]     Rule 14.6 in relation to increased costs and indemnity costs provides:

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, and witness expenses reasonably incurred by a party (indemnity costs).

….

(4)	The court may order a party to pay indemnity costs if—

(a)        the party has acted vexatiously, frivolously, improperly, or unnecessarily in  commencing,  continuing,  or  defending a proceeding or a step in a proceeding; or

1	Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA) at [19].
2	Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt) Ltd
(2002) 16 PRNZ 662 (CA) at 668.
3	Glaister v Amalgamated Dairies Ltd, above n 5, at [14].

(b)        the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or

(c)        costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or

(d)        the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or

(e)        the party claiming costs is entitled to indemnity costs under a contract or deed; or

(f)        some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination  of  costs  should  be  predictable  and expeditious: rr 14.2-14.10.

[11]     In  Paper Reclaim Ltd  v Aotearoa International Ltd  the Court of Appeal considered an application for indemnity costs pursuant to the now r 14.6(4)(a).4   The Court emphasised the need to examine the specific grounds set out in the Rule for ordering indemnity costs.

[12]     In Hedley & Ors v Kiwi Co-operative Dairies Ltd it was said:5

[8]	Such  authorities  as  there  are  indicate  that  indemnity  costs  are awarded where truly exceptional circumstances exist.

The court’s approach was approved in Bradbury v Westpac Banking Corporation.6

[13]     The Court of Appeal said:7

While recognising that the categories in respect of which the discretion may be exercised are not closed (see r 14.6(4)(f)), it listed the following circumstances in which indemnity costs have been ordered:

(a)	the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;

(b)	particular misconduct that causes loss of time to the court and to other parties;

4	Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA).
5	Hedley & Ors v Kiwi Co-operative Dairies Ltd (2002) 16 PRNZ 694 (HC) at [8].
6	Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400, (2009) 19 PRNZ 385 (CA).
7	At [29]–[30].

(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 unduly prolonging   a   case   by   groundless   contentions,   summarised   in French J’s “hopeless case” test.

Each of these concerns conduct which would fall within r 14.6(4).

[14]     The respondent, here, claims that allegations were made in the affidavit in support of the application which required response.  There is a suggestion that there may have been an improper motive for the application.  What is clear, however, is that this matter was never examined at an opposed hearing.   Rather, the applicant effectively abandoned the application and entered into a settlement arrangement for payment to the respondent.

[15]     I am not satisfied that the case justifies either indemnity or increased costs. Indeed, the difference between the two is not great.   However, the respondent has been the successful party.  These cases do require a response.  Category 2 Band B is appropriate.  That leads me to the conclusion that the case does justify an order for costs in the sum of $7,769.75, inclusive of disbursements.

[16]     Judgment is entered accordingly for costs in the sum of $7,769.75 against the applicant company.

JA Faire J