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Shearing Services Kamupene Limited (in liquidation) v Tarahau Farming Limited [2024] NZHC 3350 (11 November 2024)

Last Updated: 19 November 2024

JUDGMENT OF WHATA J

Costs

This judgment was delivered by me on 11 November 2024

pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date: ...............................

Solicitors / Counsel:

Meredith Connell, Auckland

Copy to:

P Te Whata

SHEARING SERVICES KAMUPENE LIMITED (IN LIQUIDATION) v TARAHAU FARMING LIMITED [2024] NZHC 3350 [11 November 2024]

• [1] I have before me an application by Shearing Services Kamupene Limited (in liquidation) (Shearing Services) seeking orders as to costs in relation to its successful application to have set aside a purported voluntary administration by Tarahau Farming Limited (TFL). Having succeeded in its appeal against my first decision in this matter, Shearing Services seeks an award of 2B scale costs in the sum of $13,981.50 against TFL and Mr Pessiman Pehemana Te Whata personally on a joint and several basis.

• [2] Regrettably, this aspect of the matter languished in the Court Registry until recently. I issued a minute granting leave to file further submissions, failing which I would move to judgment.

• [3] I have resolved to make the orders sought for the following reasons.

Background

In the High Court

• [4] On 20 August 2021, Shearing Services filed an originating application (the Application) for orders:

(a) directing that TFL is not in voluntary administration under pt 15A of the Companies Act 1993 (the Act) or, alternatively, that the administration had not commenced;

(b) ruling that the appointment of the second respondent, Mr Rio Greening, as administrator was invalid;

(c) in the event that the Court found TFL was in voluntary administration and that it had commenced, an order terminating the voluntary administration or appointing a licenced insolvency practitioner as administrator;

(d) any further orders the Court thinks appropriate; and

(e) increased costs in respect of the application.

• [5] Shearing Services also filed a memorandum dated 20 August 2021, applying for an urgent hearing and for directions as to service. Justice Campbell granted urgency and directions as to service by minute dated 24 August 2021.

• [6] TFL’s opposition to the application was filed by Mr Te Whata, who purported to represent TFL.

• [7] The application was heard before me on 3 September 2021. TFL was not represented by a solicitor and so did not formally appear in opposition to the application. Mr Greening did not engage in the proceeding and did not appear. I granted Mr Te Whata leave to be heard as a person interested in the administration of TFL, but expressly stated this did not confer party status onto Mr Te Whata.¹

• [8] On 10 September 2021, I issued judgment determining, among other things, that:

(a) TFL was in voluntary administration under the Act.

(b) Mr Greening was not a qualified administrator and must be removed.

(c) No further steps were to be taken in the voluntary administration pending a Court directed settlement conference pursuant to r 7.79 of the High Court Rules 2016 (HCR).

(d) The matter was to be brought back before the High Court following the settlement conference for determination as to whether the voluntary administration should proceed or be terminated.

• [9] I further directed that costs were to be reserved to a substantive hearing, should one be required following the settlement conference, of Shearing Services’ application for termination of the voluntary administration.

1. Shearing Services Kamupene Ltd (in liq) v Tarahau Farming Ltd [2021] NZHC 2376 [High Court decision] at [4].

In the Court of Appeal

• [10] On 7 October 2021, Shearing Services filed an appeal against my decision seeking:

(a) the quashing of the High Court’s judgment;

(b) a declaration that TFL is not in voluntary administration under the Act; and

(c) costs on the appeal.

• [11] The settlement conference directed by the High Court did not proceed due to Covid-19 restrictions and the pending appeal.²

• [12] At the Court of Appeal, Mr Te Whata was not formally permitted to represent TFL, but he filed documents in opposition that were taken into consideration by the Court of Appeal.³

• [13] On 26 May 2023, the Court of Appeal issued judgment on the papers allowing the appeal; quashing the High Court’s judgment; granting the order sought that TFL was not in voluntary administration under the Act; and directing that TFL pay Shearing Services costs for a standard appeal together with usual disbursements.⁴

In the Supreme Court

• [14] On 26 June 2023, TFL filed an application for leave to appeal against the Court of Appeal decision.

• [15] TFL was not formally represented, but Mr Te Whata once again filed submissions on behalf of TFL which were considered by the Court.⁵

2. See Shearing Services Kamupene Ltd (in liq) v Tarahau Farming Ltd HC Whangarei CIV-2021- 488-89, 23 September 2021 (Minute of Associate Judge Bell); and Shearing Services Kamupene Ltd (in liq) v Tarahau Farming Ltd [2023] NZCA 196 [Court of Appeal decision] at [13(b)].

³ Court of Appeal decision, above n 2, at [15]–[18].

⁴ Court of Appeal decision, above n 2, at [24]–[27].

5. Tarahau Farming Ltd v Shearing Services Kamupene Ltd (in liq) [2023] NZSC 129 [Supreme Court decision] at [3].

• [16] On 27 September 2023, the Supreme Court declined the application for leave to appeal and ordered TFL to pay Shearing Services $2,500 in costs.⁶

Submissions for Shearing Services

• [17] Shearing Services now seeks an award of 2B scale costs in the sum of

$13,981.50, against both TFL and Mr Te Whata personally on a joint and several basis, in relation to the High Court proceedings.

Costs on the High Court Proceedings

• [18] Shearing Services submit that costs on the application in the High Court had been reserved to be dealt with at a further hearing to determine whether TFL’s voluntary administration ought to be terminated.⁷ As a result of the Court of Appeal quashing the High Court’s judgment and determining that TFL was not in voluntary administration, the Application has been granted wholly in Shearing Services’ favour and, accordingly, Shearing Services argues it is now appropriate for the High Court to determine costs on the Application.

• [19] Shearing Services submit there are no set guidelines on how the costs should be assessed by the initial court where the initial court’s ruling has been overturned by an appellate court, but case law supports the general principle that costs are awarded to the party that is “successful” in the lower court due to an appeal.⁸ Shearing Services submits this is the proper approach, particularly in this case as, even on the High Court’s initial ruling, Shearing Services was partly successful because Mr Greening’s appointment as administrator was declared invalid and his removal ordered.

• [20] Shearing Services argue that, as the successful party, it is a matter of general principal that Shearing Services should be awarded costs to be paid by the

⁶ Supreme Court decision, above n 5, at [6]–[7].

⁷ High Court decision, above n 1, at [44].

⁸ LSG Sky Chefs New Zealand Ltd v Pacific Flight Catering Ltd [2015] NZHC 685 at [30]; and

Americhip Inc v Dean [2015] NZHC 1871 at [27]–[28].

unsuccessful party, although they acknowledge that this ultimately remains at the discretion of the Court.⁹

Quantum

• [21] Shearing Services seeks scale 2B costs as set out in the table below:

• [22] As seen above, Shearing Services has proposed a time allocation of 0.4 of a day for its memorandum dated 20 August 2021 seeking interlocutory orders, and for its memorandum dated 17 September 2021 for the initially allocated (but vacated) Judicial Settlement conference, by analogy with step 11, which allows for such an allocation for filing memoranda for case management of mentions hearings.

Costs against Mr Te Whata personally

• [23] Shearing Services seeks costs against Mr Te Whata personally as a non-party who effectively directed TFL’s opposition to the Application, even though he was not permitted to formally represent TFL.

9. High Court Rules 2016 [HCR], rr 14.1 and 14.2(1)(a); and Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].

• [24] Shearing Services submit that the HCR make no express mention of non-parties but confer an unfettered discretion.¹⁰ It argues that the Privy Council and, subsequently, the Supreme Court have confirmed that costs are available against non-parties in exceptional circumstances.¹¹

• [25] Shearing Services submit that the principles applying to non-party costs in the High Court, as summarised in Fankhauser v Strongline Buildings Ltd, are:¹²

(a) While costs orders against non-parties are exceptional, that means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense.

(b) The discretion will not be exercised against pure funders.

(c) Where the non-party not merely funds the proceeding, but substantially also controls or is to benefit from it, justice will ordinarily require the non-party to pay the costs of the successful party.

(d) The basis for this is that the non-party is not just funding a party to enable access to justice but is himself the real party.

• [26] Shearing Services argues that the present case is an exceptional one in which Mr Te Whata is “the real party”. They note that opposition to the application was filed by Mr Te Whata, and he was given leave to be heard as a person interested in the administration of TFL. TFL was not formally represented and, but for Mr Te Whata’s intervention, the application would have proceeded unopposed.

¹⁰ HCR, r 14.1.

¹¹ Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39, [2005] 1 NZLR 145, endorsed by Mana Property Trustee Ltd v James Developments Ltd [2010] NZSC 124, [2011] 2 NZLR 25 at [10]–[11].

¹² Fankhauser v Strongline Buildings Ltd [2014] NZHC 2629 at [14], approving and summarising

Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2), above n 11, at [25].

• [27] Shearing Services highlights that Mr Te Whata has taken similar positions in other Courts engaging on behalf of TFL and, given the role he has taken as the effective “real party”, has had costs awarded against him personally.¹³

No submissions for TFL or Mr Te Whata

• [28] As noted, issued a minute on 21 October 2024, affording the parties an opportunity to file submissions by 29 October 2024. None were filed. I have since discovered, according to correspondence between the Registry and counsel for the applicants dated 4 June 2024, that Mr Te Whata was adjudicated bankrupt on 8 February 2024. According to this correspondence, the Registry also made contact with Mr Te Whata’s Official Assignee on 4 June 2024, to provide them with an opportunity to file a reply. The deadline set out by the Registry was 6 June 2024, and no reply was filed.

Assessment

• [29] There can be no dispute an order for costs should be made against TFL as sought. As to Mr Te Whata, I refer to the following passage in The Law of Costs in New Zealand at [2.32]:¹⁴

The High Court and other superior courts have the power to make an order for costs against non-parties to a proceeding. The power is derived both, or alternatively, from the broad discretion of the court in r 14.1 and/or from its inherent jurisdiction. Generally, a non-party cannot be liable for costs if the costs would have been incurred even without the non-party’s involvement in the proceeding. Ultimately, the matter is one within the court’s discretion to be exercised consistently with applicable principles. The jurisdiction is highly fact specific and will usually require the court to undertake some sort of balancing exercise.

...

Costs awards against non-parties are exceptional in the sense that they do not arise in most ordinary cases where the litigation is pursued or defended by the parties for their own benefit and at their own expense. Generally, it will not

¹³ Ngāti Moerewa o MHKM Māori Incorporation v Attorney-General – Motatau 5E25F and others (2022) 248 Taitokerau MB 215 (248 TTK 215) at [15]–[28].

¹⁴ David Bullock and Tim Mullins The Law of Costs in New Zealand (LexisNexis, Wellington, 2022) at [2.32] (footnotes omitted). See also Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2), above n 11, at [7], [20], [25] and [26]; Carborundum Abrasives Ltd v Bank of New Zealand Ltd (No 1) [1991] NZHC 1589; [1992] 3 NZLR 187 (HC) at 191; Carborundum Abrasives Ltd v Bank of New Zealand (No 2) [1992] 3 NZLR 757 (HC); and Palmerston North City Council v Hardiway Enterprises Ltd (struck off) [2018] NZHC 1731 at [17].

be appropriate to make an order against a party that is a pure funder, that is non-commercial and does not stand to benefit from the litigation, and that in no way seeks to control its course. However, a funder that stands to benefit from its funding, or that substantially directs or controls the proceeding, will be required to pay the successful party’s costs if the court considers it just, because such a funder is in effect ‘the real party’ to the proceeding. It will be relevant whether the non-party is a cause of the litigation in a ‘but for’ sense, because it is wrong to allow someone to fund litigation in the hope of obtaining a benefit without facing the corresponding risk that they will be required to share in the costs of the proceedings if they fail.

• [30] As detailed in my substantive judgment, Mr Te Whata substantially directed and controlled the proceeding for TFL. It appears he undertook the same role in the appellate courts. While he was not a party to the proceeding in a formal sense at any level, I am satisfied therefore that there should be costs against him as well. There shall be orders accordingly.

Whata J