Cai v The Kuang (no 2) Trustee Limited

[2020] NZHC 2845

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-906

[2020] NZHC 2845

IN THE MATTER

of an application to remove a caveat under s 142 of the Land Transfer Act 2017

BETWEEN

YALI CAI

Applicant / Respondent

AND

THE KUANG (NO 2) TRUSTEE LIMITED

as trustee for the C.K. (No 2) Trust Respondent / First Applicant

AND

CONNIE KUANG

Second Applicant

Hearing:

On the papers

Appearances:

C Jiang for the Applicant / Respondent

R S Pidgeon for the Respondent / First Applicant and Second Applicant

Judgment:

30 October 2020

JUDGMENT OF GAULT J

(Costs)

This judgment was delivered by me on 30 October 2020 at 4:00 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

Solicitors:

Mr C Jiang, Glaister Ennor, Auckland Mr R S Pidgeon, Barrister, Auckland

Mr MSP Pang (respondent’s instructing solicitor), Integritas Law, Auckland

CAI v THE KUANG (NO 2) TRUSTEE LTD as trustee for the C.K. (No 2) Trust [2020] NZHC 2845 [30 October 2020]

[1]                  During the hearing of Mr Cai’s originating application for an order removing a caveat lodged by the respondent, The Kuang (No 2) Trustee Ltd, and an application by the respondent for an interim injunction on 16 July 2020, the parties reached a compromise. I made orders by consent and, in relation to costs, timetabled directions for any party seeking costs to file and serve a memorandum within five working days.1 That did not occur, but on 26 August 2020 Mr Cai filed a memorandum seeking costs.

[2]                  Mr Cai seeks costs in relation to the originating application and an earlier freezing order application made by the respondent and Ms Kuang. Mr Cai seeks costs on each application on the basis that he succeeded and r 14.2 of the High Court Rules 2016 provides that the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds.2

[3]                  In relation to the originating application, Mr Jiang, for Mr Cai, submits that Mr Cai is entitled to indemnity costs on the basis that the respondent has acted frivolously, improperly or unnecessarily in opposing the originating application, but instead seeks increased costs under r 14.6(3)(b) on the basis that the respondent has contributed unnecessarily to the time or expense of the originating application by taking or pursuing an unnecessary step or argument which lacked merit,3 and by failing, without reasonable justification, to accept Mr Cai’s legal arguments.4 Mr Cai seeks a 50 per cent uplift.

[4]                  In relation to the freezing order application, Mr Jiang submits that the respondent and Ms Kuang have acted frivolously, improperly and/or unnecessarily, but instead of indemnity costs Mr Cai seeks increased costs on the basis that the respondent and Ms Kuang have contributed unnecessarily to the time or expense of Mr Cai’s opposition rebutting baseless claims. Again, a 50 per cent uplift is sought.

1      Cai v The Kuang (No 2) Trustee Ltd HC Auckland CIV-2020-404-906, minute dated 16 July 2020.

2      Rule 14.2(1)(a).

3      Rule 14.6(3)(b)(ii).

4      Rule 14.6(3)(b)(iii).

[5]                  Mr Pidgeon, for the respondent and Ms Kuang, filed a memorandum attaching correspondence between counsel seeking to show that the respondent and Ms Kuang have attempted to be reasonable. That provoked a further memorandum on behalf of Mr Cai objecting to the inclusion of the email chain on the basis of privilege.

[6]                  The respondent does not  oppose 2B costs for the originating application.  The disbursements sought are also accepted.

[7]                  In relation to the freezing order application, Mr Pidgeon invites the exercise of the Court’s discretion under r 14.1 to view it with the application for an interim injunction. He submits the application for a freezing order was withdrawn solely because there was no clear evidence of a threat of dissipation. Although submitting that costs should lie where they fall, Mr Pidgeon concluded that the respondent and Ms Kuang accept they are liable for costs of $1,434 and disbursements of $414.

Discussion

Without prejudice save as to costs privilege

[8]                  I deal first with the inclusion of the email chain. The first email in the chain, from Mr Jiang, was clearly marked ‘without prejudice save as to costs’. Mr Pidgeon’s reply was not so marked but it was a direct reply and in context I consider it was sent on the same basis. Likewise, Mr Jiang’s subsequent reply.

[9]                  Correspondence that is made ‘without prejudice save as to costs’ is privileged by definition ‘save as to costs’. In the context of a dispute as to costs, I consider that ‘without prejudice save as to costs’ correspondence is only relevant to costs in relation to costs. While the Court has power to award costs in relation to costs, they are unusual and the Court is reluctant to award them.5 Furthermore, costs issues should not be protracted by way of a two-stage process that defers consideration of costs on costs, including reference to ‘without prejudice save as to costs’ correspondence, until after costs have otherwise been determined.

5      Jeffreys v Morgenstern [2013] NZHC 1361 at [40]; and Barry Park Investments Ltd v Body Corporate Number 95388 [2016] NZHC 1527 at [25].

[10]              Therefore, insofar as the email correspondence is relevant to the issue of costs on costs, I consider it is not privileged and may be taken into account. However, here costs on costs are not even sought. The email correspondence is therefore irrelevant, and I need not address it further except to note that difficulties may arise when there is a dispute between counsel as to whether correspondence between themselves is privileged.

Originating application

[11]              Mr  Cai  is  entitled  to  costs  in  relation  to  the  originating  application.   He succeeded in obtaining an order that the caveat be removed, albeit by consent part way through the hearing.

[12]              It is unnecessary to consider indemnity costs. Increased costs may be awarded where there is a failure by the paying party to act reasonably.6 On an application for increased costs, the applicant must persuade the Court they are justified. Where the application was resolved rather than determined by the Court, it may be more difficult for the applicant to persuade the Court that the respondent has acted unreasonably and increased costs are justified.

[13]              The hearing suggested the respondent’s opposition lacked merit. The caveat was lodged following a decision of the Court in relation to a caveat by a related party, and was arguably an abuse of process. If the matter had proceeded to Court determination and I had reached such conclusions, increased costs would have been appropriate. However, in the circumstances of the compromise reached at the hearing, I am not persuaded that increased costs are justified.

Freezing order

[14]              As indicated, Mr Cai seeks costs in relation to the abandoned freezing order application but not the compromised interim injunction application. The interlocutory application by the respondent and Ms Kuang (who purported to join the proceeding for that purpose) was a combined application seeking a freezing order or, in the

6      Rule 14.6(3); and Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [27(b)].

alternative, an interim injunction. The freezing order was abandoned in advance of the hearing, likely following the realisation that there was insufficient evidence in relation to the risk of dissipation.

[15]              Although r 15.23 concerning costs on the discontinuance of a proceeding does not apply to interlocutory applications, it may by analogy mean that an applicant who has abandoned an interlocutory application should pay costs where the Court does not know what the merits of the respective positions of the parties were and ought not to try to come to a view. Such an approach recognises that, absent some other explanation, “a likely explanation for the applicant not proceeding is that it appreciated that it was unlikely that its application would prevail”.7

[16]              I consider the likely explanation for the freezing order application not proceeding was that it was appreciated it was unlikely to prevail. The inter- relationship with the interim injunction application, which was resolved by agreement and in respect of which Mr Cai sensibly does not seek costs, means that it might be appropriate for the costs of the abandoned freezing order application to lie where they fall, but the respondent and Ms Kuang accept they are liable for 2B scale costs of

$1,434 and disbursements of $414.

[17]              I am not persuaded that increased costs are appropriate. Mr Cai had to respond to the application for interim injunction in any event. The only step taken and for which costs are sought was the filing of the notice of opposition, which was also a combined notice relating both to the interim injunction and freezing order.

Result

[18]              The applicant is entitled to 2B costs of $11,830.50 and disbursements of $1,711 in respect of its originating application.

7      MV Celebre Ltd v Airwork Flight Operations Ltd [2015] NZHC 1400 at [13].

[19]              The applicant is entitled to 2B costs of $1,434 and disbursements of $414 in respect of the abandoned application for a freezing order.

Gault J