New Zealand: Liquidators’ liability for litigation costs

Last Updated: 10 November 2010
Article by Geoff Carter and James McMillan

Most Read Contributor in New Zealand, September 2016

The longstanding view that liquidators are not personally liable for litigation costs has been reaffirmed in two recent decisions, one from the Supreme Court and the other from the High Court.

This Brief Counsel looks at the two cases.

Mana Property

At issue in Mana Property Trustee Limited v James Development Limited [2010] NZSC 124 was whether a liquidator can attract personal liability for costs by electing to continue with litigation.

James Development appealed against a High Court finding that it had invalidly cancelled a contract to purchase land from Mana. Prior to the Court of Appeal hearing, liquidators were appointed to James Development. The liquidators pursued the appeal, and won.

Mana then appealed to the Supreme Court, which overturned the Court of Appeal finding and held that the cancellation was invalid. Mana applied for costs against the liquidators personally, founded upon the liquidators' decision to continue the proceedings.

The Court noted that s.248 of the Companies Act 1993 provides that the commencement or continuation of a proceeding against a company in liquidation requires the liquidator's or the court's consent, but that a liquidator has power under Schedule 6 of the Act to commence, continue or defend proceedings without any court consent required. The party to the litigation was the company and the liquidators were merely its agents.

While the Court acknowledged that it had the power to order a liquidator as a non-party to pay costs personally, it confirmed the long-standing principle that a liquidator will not be at risk of a costs award, unless there are exceptional circumstances (such as impropriety or bad faith). The other party could protect its position by seeking an order for security for costs.

On the facts, the Supreme Court did not consider that the case was one in which the liquidators should pay costs personally. The liquidators had taken independent legal advice before confirming that the appeal would be pursued, and it was not a situation where the appeal was so hopeless that the liquidators could be regarded as having acted improperly by continuing with it. The Court also considered that the funding of the appeal by the sole shareholder of James Development was not something that would expose the liquidators to personal liability.

Magsons Hardware

Magsons Hardware Limited and Anor v Pritish Patel And Anor (High Court, Auckland, CIV-2010-404-2891, 10 September 2010) involved a liquidator's decision not to consent to the commencement of proceedings against the company in liquidation.

Doric Interiors & Construction Limited had issued statutory demands against Magsons and Vijay Holdings Limited in relation to payment claims under the Construction Contracts Act 2002. Magsons and Vijay (in part) set aside the demands in the High Court. Doric appealed, but was subsequently placed into voluntary liquidation.

Magsons and Vijay sought the consent of Doric's liquidator to begin separate proceedings against Doric to establish whether they had any liability to Doric. The liquidator refused consent, resulting in Magsons and Vijay applying to the High Court, which the liquidator actively opposed.

Doric's appeal was unsuccessful and the liquidator withdrew his opposition to the making of an order granting consent to commence proceedings. Magsons sought costs against the liquidator personally for not earlier consenting to the proceedings.

The High Court noted the "somewhat combative attitude" of the liquidator, but considered that s.248 of the Companies Act did not place any obligation on a liquidator to consent to the commencement or continuation of a proceeding. The liquidator had not acted in bad faith by refusing to consent to the proceedings, and was entitled to leave the question of consent to the Court, without automatically incurring the risk of personal liability for costs.


The courts' affirmation that a liquidator who is not a party to a proceeding is not generally at risk of a costs award is undoubtedly correct. However, in both cases the courts pointed out that this general protection does not apply if a liquidator elects to sue in his or her own name. In such a case, a liquidator will ordinarily be personally liable for costs, whether or not the liquidator is entitled to reimbursement from the company assets.

The cases also emphasise that exceptional circumstances (being circumstances where parties pursue or defend claims for their own benefit and at their own expense, including where there is bad faith or impropriety) may result in liquidators being personally liable. This may include the commencement or continuation of proceedings which are not reasonably arguable, so liquidators would be prudent to seek legal advice when making such decisions.

The Magsons case does not go so far as to create a blanket rule that a liquidator can never be subject to costs if he or she defends a consent application and loses. Under such a scenario, costs may follow and the particular circumstances of each case will be highly relevant. The Magsons case does, however, allow liquidators to decline to give consent to court proceedings without fear of costs consequences.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

James McMillan
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.