Chen v Liu

[2017] NZHC 911

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-002150 [2017] NZHC 911

UNDER

Section 145A of the Land Transfer Act

1952

AND UNDER

The Administration Act 1969

AND UNDER

The Property (Relationships) Act 1976

BETWEEN

XIAOLONG CHEN First Applicant

ROYAL REED as Administrator of the estate of BIN (CISSY) CHEN

Second Applicant

AND

YUN QING LIU Respondent

Hearing:	27 April 2017
Appearances:	Mr D Liu for Applicants Ms So and Ms E Ho for Respondent
Judgment:	9 May 2017

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on

09.05.17 at 3.30 pm, pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

CHEN & Anor v LIU [2017] NZHC 911 [9 May 2017]

[1]      The respondent filed notices with Land Information New Zealand (“LINZ”) which had the effect of triggering the lapsing mechanism under s 145A of the Land Transfer Act in respect of caveats that the applicants had lodged.  For reasons which are discussed below there was confusion on the part of LINZ which has led to the present application for order sustaining caveats.

[2]      The brief background is as follows. It is necessary to briefly explain the position with regard to LINZ.  It would appear that the notice was given to LINZ on behalf of the respondent by his previous legal advisors in October 2015 triggering the lapsing mechanism.  However due to inactivity on the part of a staff member at LINZ, the notices were apparently overlooked until January 2017.  That month LINZ contacted the former legal advisers for the respondent to ascertain whether it was still the respondent’s contention that notice should be given to the applicant’s lapsing the caveats.   I am told that LINZ did not respond to this request for information. LINZ then  gave  the notices  lapsing the  caveats  which  had  to  be  dealt  with  in circumstances of urgency which resulted in the applicants filing an application to sustain the further caveats on 6 April 2017 and copies were served on the respondent’s former legal advisors.  An urgent hearing was scheduled by the High Court for 12 April 2017.

[3]      On 11 April 2017, the respondent instructed his present legal advisors and was represented by them at a first call of the matter on 12 April 2017.

[4]      Attempts were made prior to the hearing and on the day at the hearing to reach agreement as to an interim basis upon which the caveats might be sustained. No agreement was possible.  The applicants contend that the respondent refused to consent to any order of that kind and that contention has not been contradicted by the respondent.

[5]      At the hearing on 12 April the Court made arrangements for an opposed hearing to take place on 27 April and timetable orders were made.  On 19 April 2017 the respondent’s current legal advisors stated that the respondent would accept the making of an order sustaining the caveats but would not agree to costs which he

contended ought to lie where they fall and, if agreement concerning that was not possible, that he himself would apply for costs.

[6]      The parties have now come to a consent arrangement in terms of which the parties agreed to a consent order that the caveats not lapse.  They have not been able to agree on costs.  It is a matter which was set down for hearing before me on 27

April 2017.

[7]      The  starting  point  in  my  view  is  that  the  presumption  must  be  that  the respondent should pay costs having regard to the fact that it is, if  not literally, analogously the party who has failed with respect to this proceeding.  It is difficult to see how the Court would approach the matter otherwise.   There is no practical difference between a party opposing an application right up until the point where the hearing is about to commence and then consenting to the relief sought, on the one hand, and the case upon the other where a party persists with opposition which results in the applicant obtaining the relief sought.  In my view this is the objective of the principles set out in HCR 14.2, and particularly HCR 14.2(a).

[8]      The  current  legal  advisers  for  the  respondent  submit  that  they  found themselves handicapped because they say that their client has not been able to obtain from his previous solicitors the file which presumably contains a full set of the pleadings which set out the case which the respondent was required to meet in regard to  the  caveats.    The  current  solicitors  accept  that  attempts  were  made  by  the applicants to provide a set of the proceedings to them.   They say though that the copies provided were incomplete and that an affidavit which was part of the documents was not supplied.

[9]      The  question  therefore  is  whether  in  these  circumstances  the  respondent ought not to pay costs.

[10]     The  next  issue  that  has  been  raised  by the  respondent  is  that  he  is  not responsible for the fact that notices triggering the s 145A process were in fact lodged with LINZ.

[11]     It is not clear what the respondent’s position is concerning his responsibility,

if any, for the issue of the s 145A notices.

[12]     The fact is that solicitors apparently acting with his authority and as his agents sent the s 145A notices to LINZ.  The applicants had no option but to respond to the process that was put in train as a result of the notices being sent to LINZ. They would have suffered harm had they not done so.

[13]     It is apparent from the tenor of the submissions which have been filed on the part of the respondent that there may have been some fault on the part of LINZ. Quite what the assertion is is not clear.  Plainly they took far too long to process the notices.   But I am not clear whether the respondent is now also saying that in proceeding as it did, LINZ was not acting in accordance with instructions for authority from the respondent.  In the end it does not matter though when it comes to the question of resolving the costs issue.  As I have said the applicants were bound to act.  It was not their responsibility to embark on enquiries from LINZ as to whether an instruction given in October 2015 to lapse the caveat still reflected the wishes of the respondent.   If LINZ did not, for example, act on a countermanding and subsequent instruction not to proceed with the lapsing notices, then that is a matter between the respondent and LINZ.   It is not a factor that impacts the question of costs which needs to be decided on the present application.

Alleged faults on the part of the applicants in providing service copies of documents

[14]     Another point that was brought up by the respondents was the assertion that the applicants did not serve a copy of the affidavit in support of the application until late in the proceedings.  This, I understand, is put forward as a further basis for an argument that the respondent ought not to have to pay costs.

[15]     It is necessary to briefly give further consideration to the timeline when dealing with this point.

[16]     In overview, the position was that the applicants had to deal with the intended lapsing of the caveats within a very short period if they were not to suffer harm.

[17]     On 24 March 2017 LINZ served s 145A notices on the applicants.   On 6

April the applicants applied, by way of an amendment to the original originating application that they had filed, for orders that the caveats not lapse.  Mr Liu told me that there were difficulties in obtaining a hearing date which was barely enough to enable the applicants to come before the Court to obtain an order before the caveats lapsed.  He told me that the initial date which the Registrar offered was in May but that would have been too late.  The problem was compounded by the fact that the Court was closed for the Easter vacation essentially from 5 p.m. on 12 April 2017 until 24 April 2017.   Eventually an urgent hearing was obtained for 12 April on which date the Court made arrangements for hearing of the application on 27 April

2017.

Should costs be reserved?

[18]     The next issue concerns whether costs ought to be resolved now or left to a later date.   The contention of the respondent was that the costs matter should be deferred until the substantive dispute between the parties underlying the issue of the caveats had been resolved.  At that point, it was submitted, the Court would be in a better position to assess the merits of the various claims.

[19]     On the other hand  the  applicants  assert  that  the costs  issue ought  to  be resolved now on the present application.   Counsel for the applicants,   Mr R E Harrison QC, made reference to the approach adopted by Mander J in Millstone Grazing Ltd v Myoak Holdings Ltd,1 which contains a useful summary on the recent development of the law:

[7]       The  starting  point  is  that  a  successful  party  to  a  proceeding  or  an interlocutory application is entitled to costs. Originating applications share many similarities with interlocutory applications, and in many respects the same rules apply.

[8]       In large measure, Myoak’s opposition rests on the proposition that because typically  applications  to  sustain  a  caveat  are  the  prelude  to  more substantive litigation and have the effect of only preserving the position pending more rigorous assessment of the merits of the parties’ cases, it

would be premature to decide the issue of costs. There is some attraction to

1 Millstone Grazing Ltd v Myoak Holdings Ltd [2016] NZHC 1760.

an  approach that  allows  the  question  of  costs  to  be  informed  by  the subsequent substantive proceedings. However, that may result in the more confined nature of the issue with which the Court is concerned at this preliminary stage being overlooked. The issue for the Court in deciding whether to sustain the caveat is quite different from the ultimate decision that will be required on the substantive proceeding.

[9]       The issue of costs is to be determined on the basis of the success of the parties as it relates to the discrete application before the Court. The parties in  contesting  the  restricted  question  of  whether  a  caveat  should  be sustained are aware of the limited nature of the Court’s inquiry and the low threshold which is to be applied. The parties are able to make their own assessment of the respective merits of their arguments as it relates to the particular issue to be determined by the Court based upon the known test. This was the situation in the present case. There is nothing inconsistent in a party being awarded costs  for  being successful in  sustaining a  caveat measured against the applicable legal principle of showing a reasonably arguable case, and that party ultimately being unsuccessful at trial for which it will have to bear the costs.

[10]     While Myoak was able to point to a number of cases where no award of costs were made, it appears that in recent time successful applications to sustain caveats have typically been accompanied by cost orders in favour of the applicant on a 2B basis. It is trite to observe that each case turns on its individual circumstances and that the award of costs is quintessentially discretionary.  That  discretion,  however,  is  not  unfettered,  and  in  the absence of good reason the cost regime will be applied in accordance with the principles and guidance provided by the rules.

[11]     For these reasons, I consider it is appropriate that in the ordinary way costs should follow the event in favour of the successful party

[20]     I agree with and intend to follow the above observations.  Costs ought now to be fixed.

[21]     Ms So referred to the fact that at an earlier stage in these proceedings after making consent orders, Lang J ordered that the costs be reserved with the apparent intention that the costs would be fixed once the underlying dispute between the parties had been dealt with in substantive proceedings.   Her submission was that:

19.The respondent  submits the  issue of costs should be  determined pending the outcome of the Substantive Claims for the following reasons:

(a)      The  issue  of  costs  arising  from  both  the  Originating Application and the Amended Application should be dealt with  at  the  same  time.  In  the  December  2015  Consent Orders, the parties agreed that costs be reserved pending the outcome of the Substantive Claims. Since the parties have agreed to this arrangement with the Originating Application, there is no reason why the parties cannot also agree to do the same with the Amending Application.

[22]     The fact that the parties may have at an earlier stage agreed to costs for a particular step in the proceedings being reserved for later, this position does not in my view affect the position here.  The agreement to which Ms So has made reference was limited to the matters on which the parties agreed at the time and she did not attempt to argue that it was an agreement that was intended to extend to all subsequent situations where costs issues might arise.

The responsibility of LINZ

[23]     The submission was made for the respondent that he should not be held responsible for the costs when there had been fault on the part of LINZ.

[24]     In my view, the Court ought not to enquire into the way in which LINZ dealt with the notices of lapse.  LINZ is not before the Court.

[25]     But  in  any  event,  the  cause  of  LINZ  becoming  involved  was  that  the respondent lodged lapse notices with LINZ and thereafter failed to withdraw them. Even of LINZ had dealt with the notices promptly, it does not follow that there would not have been a need for an application of the present kind.

[26]     Further, if the applicants are the successful party, their entitlement to costs ought not to be declined on a discretionary basis taking into account the fact that there may or may not be some claim available to one or more of the parties against LINZ.  In my view the proper outcome is for the respondent to meet any costs order and if he is able to recover any part of the costs involved from LINZ that is a matter for him to pursue.

The effect, if any, on costs of the failure by the applicants to serve the affidavit in support of the application

[27]     The amended  originating  application  with  that  hearing  date  inserted  was served on the respondent on 11 April 2017.  The applicants do not contest that only the application was served – they omitted to serve the affidavit in support of the application.  The applicants accept that a copy of the affidavit was not supplied to the current legal advisers for the respondent until 19 April 2017 which was last Wednesday, with today’s hearing being eight days after.

[28]     The contention of the respondent is that his counsel could not provide advice to him on the question of whether he ought to accede to the invitation to consent to orders sustaining the caveats without first having viewed a copy of the affidavit. Ms So told me that it was only after the affidavit had been reviewed by counsel on

19 April that the current legal advisors were able to advise the respondent on the question of consenting to an order.

[29]   However, the respondent states that the current legal advisors were not instructed until 11 April, the day before the initial call of the matter in the High Court.     The  respondent  says  that  negotiations  between  the  parties  about  the possibility of a consent order proceeded but it wasn’t until 19 April that the respondent informed the applicants that he would consider a consent order and then only on the basis that costs would be payable to him.  However at the end of the day on 19 April the respondent finally agreed to a consent order which the applicants proposed  on  the  basis  that  he  would  not  seek  costs  against  the  applicants. Apparently there  was  no  offer on  the part  of  the applicants  to  an  arrangement whereby  they  would  forego  costs.     Thereafter,  on  21  April  2017,  a  joint memorandum was filed inviting the Court to make consent orders and to resolve the question of costs.

[30]     I do not accept that the conduct of the applicants was such as to provide a discretionary reason why the Court should decline to order costs in favour of themselves.

[31]     I agree with the applicants that the real cause of the legal costs being incurred here was the necessity to file an application in circumstances which, if not exactly urgent, were pressing.   Had the respondent not instructed his solicitors in October

2015 to notify LINZ of his intention to lapse the caveats, it would not have been necessary to bring the current application.

[32]     I agree with the respondent that it was incumbent upon the applicants to serve all of the papers that they would be relying upon at the hearing on 12 April on him or his legal advisors.  I do not agree though that the failure to provide a copy of the affidavit (which although a breach of the requirements of the High Court rules) would have had any practical effect on the ability of the current legal advisors to advise their client.  I accept that they, too, would have been under pressure of time as that is the nature of the caveat proceedings – and proceedings in this case which were brought about solely by the failure of the respondent to recall his notices to LINZ.

[33]     Taking  a  practical  view  of  matters,  it  would  have  been  apparent  to  the applicants immediately upon receiving the application that there was an affidavit supporting that application.   Further, it could not have escaped their notice that a copy of that affidavit had not been served with the application.  It would have been a simple matter for them to contact the legal advisors for the applicants (whose names and contact details were apparent on the face of the document served) to obtain a copy of the affidavit.   These remarks are not to be understood as amounting to a statement that failure to supply documents is of no concern in circumstances where the served party receives an incomplete set of documents.  Rather, the breach of the rules in this case, taking a practical and realistic view of matters, is unlikely to have been a substantial cause of legal costs being incurred.

[34]     The applicants  legal  advisors  attempted  to  communicate with  the former solicitors for the respondent when the s 145A notices came to their attention.  The fact that those previous advisors were not in receipt of instructions was not the fault of the applicants.

[35]     It is going too far to suggest that in the circumstances where it would have been apparent to the advisors of the respondent that they had not received a complete set of the documents that they had no option but to wait until the failure to serve the document  had  been  remedied  before  they  could  embark  upon  advising  the respondent.   The grounds of the application were apparent on the face of the application and the respondent had been involved in earlier proceedings between the same parties involving the caveats.  Those considerations coupled with the fact that the respondent’s legal advisors could easily have obtained a copy of the affidavit from the applicants’ solicitors or from the court files means that there is nothing in this point, in my view.

The negotiations leading up to the consent orders

[36]     Because of the pressing nature of the proceedings, the applicants had, as I have already observed, no option but to take prompt steps to issue a caveat proceedings.  They did so well in advance of any negotiations between the parties occurring.  By the time those negotiations occurred, the existence of the proceedings was a fait accompli.

[37]     It could be suggested that had the parties come to a negotiated settlement of the consent orders at an earlier stage, then parts of the legal services which the applicants’ legal advisors were required to provide would not have been necessary and, therefore, the costs relating to those services would not have been incurred.

[38]     However, there are two aspects of the matter which in my view answer any contention that the failure to come to a consented position should be taken into account when deciding whether a costs order ought to be made and, if so, the quantum of such an order.

[39]     In the first place, the applicants are correct when saying that preparation of the applicants’ submissions (which would seem to be the only possible area in which there is a genuine basis for contention) had to be undertaken well in advance of the hearing.  Obviously counsel could not leave preparation of the submissions until the last minute.  In fact, the submissions had to be filed by 20 April 2017.  As I have indicated already, it was not until after the close of business on 19 April 2017 that

the parties came to an agreement whereby a consent order would be made.  As well, counsel for the applicants would have had to fit in time to draw the submissions up while at the same time balancing priorities that attached to other work on hand.

[40]     It would be wrong in my view for the Court to attempt to embark upon a minute analysis of the correct sequence in which counsel for the applicant sought to have undertaken this work.  That will involve consideration of whether the work on preparing the submissions could have been left to a later date so that submissions would not, in the event, have proved to be necessary because of the consent arrangement  that  the  parties  were  ultimately to  enter  into.    It  is  impractical  to conduct such an enquiry and in any event it involves matters of judgment and the circumstances that counsel found himself in attempting to prioritise carrying out the

work for the hearing scheduled for 27th of April.

[41]     A further aspect of the negotiations which the respondent regards as being relevant relates to the position that the respondent’s counsel took at the hearing on costs.   It was the substance of the argument for the respondent that Ms So put forward that the position which the respondent took in the negotiations was justified. That is to say when he claimed that it was the applicants rather than himself who should pay costs, he was acting reasonably and the failure of the applicants to accept that position meant that no agreed position could be reached until a time later than it otherwise would have been reached.

[42]     I do not accept these arguments.

[43]     In the negotiations, the respondent adopted a position which he has since, sensibly, abandoned.   The fact that he was trying to negotiate his way out of the proceedings is understandable.   But the fact that he was unsuccessful and that ultimately he had to concede that the applicants were entitled to the relief which they had sought in the proceedings cannot be a matter that affects his obligation to pay costs.   The option was open to him to take a realistic position on the question of costs and to obtain an early settlement or to protract the negotiations and risk the amount of costs increasing until a settlement could be arrived at.  He took the second option and he must now face the consequences of doing so.

No financial ability to pay costs

[44]     The respondent says that he has no resources from which to meet a costs order.  He says that the property that he had to resort to cannot be sold because of the existence of the caveat.  As Mr Liu pointed out there is no evidence whatsoever of his financial position.

[45]     However, there is a more fundamental problem with the submission and that is that the ability of a party to meet a costs order is not one of the matters that the Court is mandated to take into account.

[46]     Mr Liu contended that the respondent does not own the entire beneficial interest in the property and that he has recognised the claims of the second applicant as the administrator of his deceased partner’s estate.

[47]     Mr Liu also submitted that if the position was genuinely as the respondent states it to be, he could have put forward a proposal for the property to be sold and the proceeds held on agreed terms.  I do not consider that such a submission can be properly evaluated in the context of a cost application of the present kind.  It might after all be ultimately held that the applicants have no interest at all in the property. Adopting a position that the respondent should now be agreeing to sell the property (of which I understand he is the legal proprietor) and would not seem to be fair to him.

[48]     It is not in any event necessary to come to a final conclusion on the argument that I have just been discussing because as I have said, the question of whether the respondent is, or is not, unable to meet a costs order is not something that is relevant to the making of a costs order.

Quantum of order

[49]     The applicants have sought indemnity or augmented costs.   I do not agree that there are any grounds disclosed in the material that has been placed before me

that would justify making an order on such a basis.  The correct position is that an order for 2B costs is appropriate in the circumstances of this case and that is the order which the Court makes.

[50]     As part of the submission which he filed, Mr Liu included a table setting out the 2B costs which are recoverable together with the disbursements.  In my view all of the items claimed are reasonable and they ought to be paid together with the disbursement for sealing the Court order.

Orders on consent memorandum

[51]     By consent there will be orders in terms of the draft judgment which the parties have submitted.

J.P. Doogue

Associate Judge