Cavit v Deng
[2025] NZHC 1756
•30 June 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-3225
[2025] NZHC 1756
BETWEEN DEBORAH ELIZABETH CAVIT AND HARBOUR TRUSTEE SERVICES (CAVIT) LIMITED
Plaintiffs
AND
QUNHUA DENG
Defendant
Hearing: on the papers Counsel:
P Daniels and C Crocker for plaintiffs K Sun for defendant
Judgment:
30 June 2025
JUDGMENT OF JOHNSTONE J
(costs)
This judgment was delivered by me on 30 June 2025 at 4pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Burton Partners, Auckland Capstone Law, Auckland
CAVIT v DENG [2025] NZHC 1756 [30 June 2025]
[1] By judgment dated 25 February 2025, I granted Ms Cavit and her trustee company an interim injunction, requiring Ms Deng not to undertake construction work at her Parnell property, except to the extent necessary to re-instate walls and buildings to their prior dimensions or with Ms Cavit’s consent.
[2] I did so because the property’s cross-lease to which the property is subject forbids any alteration, addition to or extension of the buildings at that property without Ms Cavit’s consent, which may not be unreasonably withheld. I observed there to be “a fair argument that the cross-lease entitles Ms Cavit simply to forbid any extension of [the] top level” of Ms Deng’s house. Ms Deng had commenced re-construction of the property, intending (amongst other things) to extend the top level. She had obtained a building consent for the work from Auckland Council. But she had not obtained Ms Cavit’s consent, nor activated the arbitral procedure required in the event of dispute under the cross-lease.
[3] I also observed that Ms Cavit appeared entitled to costs. The parties having failed to agree costs, Ms Cavit now seeks costs on an indemnity basis, in the sum of
$140,372.45 plus disbursements of $21,165.47. Ms Deng opposes and says that costs should lie where they fall, or be awarded on a 2B basis.
Ms Cavit’s position
[4]Ms Cavit seeks indemnity costs on the basis that they are:
(a)provided for under the cross-lease; and
(b)justified because Ms Deng pursued groundless claims and behaved “badly or very unreasonably” prior to this proceeding being commenced and while it was on foot.
Principles
[5] The Court’s discretion in costs matters, vested by r 14.1 of the High Court Rules 2016, requires generally to be exercised in accordance with the principles set
out in r 14.2.1 As observed by the Court of Appeal in Water Guard NZ Ltd v Midgen Enterprises Ltd, “the first of those general principles is that the party which fails should pay the costs of the successful party”.2 This “formalis[es] the paramount rule that costs should follow the event.”3
[6] Similarly, the Court may order that a successful party be paid increased costs, or indemnity costs, in circumstances outlined in r 14.6.
[7] Increased costs are awarded where there is a failure of a party to act reasonably during the proceeding.4 Failure to accept an offer of settlement may justify increased costs.5
[8] Indemnity costs, on the other hand, may be awarded in exceptional circumstances if the paying party has acted unreasonably in the proceeding, there is an entitlement under a contract, or some other reason exists that justifies it.6 Whether a contract entitles a party to indemnity costs is a matter of contractual interpretation, and the entitlement must be plainly and unambiguously expressed.7 To have “acted unreasonably” a party must have behaved either badly or very unreasonably, and be guilty of flagrant misconduct.8 Examples include particular misconduct that causes loss of time to the court and to other parties; commencing or continuing proceedings in wilful disregard of known facts or clearly established law; or making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, (the “hopeless case” test).9
1 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36 at [12].
2 At [13].
3 At [13].
4 Bradbury v Westpac Banking Corp [2009] 3 NZLR 400, (2009) 19 PRNZ 385 (CA) at [27]; Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160].
5 High Court Rules 2016, r 14.6(3)(b)(v).
6 High Court Rules, r 14.6(4).
7 Re Adelphi Hotel (Brighton) Ltd [1953] 1 WLR 955 (Ch) at 961.
8 Bradbury v Westpac Banking Corp, above n 4, at [28] citing Prebble v Awatere Huata (No 2)
[2005] 2 NZLR 467 (SC) at [6].
9 Bradbury v Westpac Banking Corp, above n 4, at [29].
Is Ms Cavit entitled to indemnity costs?
Does the cross-lease entitle Ms Cavit to indemnity costs?
[9] Ms Cavit’s claim to indemnity costs under the cross-lease relies on cls 2 and 23. It succeeds in respect of neither clause.
[10] Clause 2 provides that Ms Deng will pay the plaintiffs’ costs “properly incurred in respect of the flat”, or of “any repairs or work to any part of any building on the land… necessary or required as a result of a wilful or negligent act of [Ms Deng or her agents]”. Reading cl 2 in its entirety suggests it is intended to facilitate repayment of expenses incurred in relation to the upkeep, maintenance and condition of the buildings and land. On that basis, costs associated with legal proceedings are not costs properly incurred “in respect of the flat”. Nor are they “costs of any repairs or work” that is “necessary or required” in the physical sense that the clause envisages. I do not consider Ms Cavit entitled under cl 2 to costs that are not directly related to the physical upkeep and maintenance of the property.
[11] Clause 23 provides that “if [Ms Deng] at any time fails to perform or observe” the cross-lease the plaintiffs may “pay any moneys which [Ms Deng] ought to have paid” or “do all or any acts or things which [Ms Deng] ought to have done”. And Ms Deng “shall in such event immediately on demand pay [the plaintiffs … all] money so paid”. Making an application for relief against Ms Deng’s conduct cannot be considered an act or thing Ms Deng ought to have done. And paying the costs of such an application cannot of themselves be considered moneys which Ms Deng ought to have paid.
Does Ms Deng’s conduct entitle the plaintiffs to indemnity costs?
[12] As indicated above, the plaintiffs will be entitled to indemnity costs if Ms Deng acted either badly or very unreasonably, her behaviour amounting to flagrant misconduct. Here, the pre-proceeding background provides important context.
[13] Correspondence began between Ms Cavit’s solicitors and Ms Deng in September 2024. The letters pointed out, clearly, that cl 9 of the cross-lease required
Ms Deng to have obtained Ms Cavit’s consent before she could proceed with any alteration, addition to or extension of the buildings on Ms Deng’s land. While cl 9 goes on to provide that such consent shall not be unreasonably withheld, cl 26 provides that disputes should be referred to arbitration. Ms Deng did not at first refer the dispute to arbitration. I consider it unreasonable of Ms Deng simply to have proceeded to redevelop her property, in the absence of Ms Cavit’s prior consent, or before an arbitral determination in her favour.
[14] Further, by the time of Gault J’s “interim interim” orders of 20 December 2024, Ms Deng had substantially demolished her house to prepare for its reconstruction. She had not ceased this work, despite it being made clear that it was contrary to the cross-lease. And her affidavit in opposition to the interim relief application confirmed her intention to expand the footprint of the top floor of her house.
[15] But that said, it must be noted that, at first, neither of the parties referred their dispute to arbitration. Ms Cavit’s proceeding in this Court initially sought both urgent interim, and substantive, relief. When Ms Deng instructed new counsel, more attention was paid to cl 26, and the substantive aspect of Ms Cavit’s proceeding was stayed. And while Ms Deng raised and then abandoned various claims made in the proceeding, it is not usual that parties’ positions are amended from time to time to reflect new information and changing circumstances.
[16] Indemnity costs are not awarded to punish conduct occurring prior to the commencement of proceedings.10 I therefore put to one side Ms Deng’s behaviour and correspondence prior to the commencement of proceedings, except to the extent (as outlined above) it provides context to the plaintiffs’ entirely understandable decision to commence the proceedings in the face of Ms Deng’s unreasonable decision to simply continue the redevelopment.
[17] Overall, in my view Ms Deng’s conduct in the proceeding was unreasonable, but not so unreasonable as to justify indemnity costs.
10 Paper Reclaim Ltd v Aotearoa International Limited, above n 4, at [160]; Corrick v Silich [2018] NZCA 221 at [60].
Are the plaintiffs entitled to increased costs?
[18] In her conduct of the proceeding, Ms Deng advanced several arguments, unrelated to the issue of whether the terms of the lease were being complied with. Yet, given the terms of the cross-lease, which the plaintiffs’ lawyers had explained to Ms Deng, the issues were narrow. Ultimately, as noted in my judgment, there remained a considerable risk Ms Deng would seek to continue to redevelop in the absence of consent or an arbitral award. As the above discussion indicates, I consider Ms Deng’s conduct in response to the proceeding, including her offer of an undertaking which did not prevent her from redeveloping the upper level of her house so as to increase its dimensions, to have been unreasonable.
[19]Overall, I consider that increased costs of 50 per cent are justified.
Result
[20]I decline to order indemnity costs.
[21] Ms Deng is to pay the plaintiffs increased costs of $32,444.25, calculated on the basis of a 50 per cent increase on category 2B costs between 3 December 2024 to 27 February 2025 (which excludes any award for the costs of Ms Cavit’s unsuccessful application for adjournment of the fixture at which Ms Deng ultimately succeeded).
[22]Further, Ms Deng is to pay the plaintiffs’ disbursements, in the sum of
$21,165.47.
Johnstone J
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