Classic Flights Limited (in liquidation) v Li

[2025] NZHC 1712

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2023-425-65

[2025] NZHC 1712

UNDER

The Companies Act 1993

BETWEEN

CLASSIC FLIGHTS LIMITED

(in liquidation) First Plaintiff

TREVOR EDWIN LAING and EMMA MARGARET LAING

Second Plaintiffs

AND

JUNJIE LI

Defendant

Hearing:

On the Papers

Appearances:

J C D Guest for Plaintiffs

B B Gresson and E M A Downey for Defendant

Judgment:

26 June 2025

JUDGMENT OF CHURCHMAN J

[Costs]

Introduction

[1]                  In my judgment dated 6 May 2025, I found the plaintiff breached his duties as a director of the plaintiff, Classic Flights Ltd (in liquidation) (Classic Flights), under s 301 of the Companies Act 1993.1 I ordered the defendant to pay $126,607.78 plus interest of $32,784.

1      Classic Flights Ltd (in liquidation), Laing and Laing v Li [2025] NZHC 1063.

CLASSIC FLIGHTS LIMITED (in liquidation) v LI [2025] NZHC 1712 [26 June 2025]

[2]                  The liquidators on behalf of Classic Flights, Trevor Laing and Emma Laing, seek indemnity costs against the defendant, Mr Li. The plaintiffs seek an award of indemnity costs of $85,000 plus GST for a total of $98,015 for 204 hours of work done related to the proceedings from 15 June 2023. In the alternative, the plaintiffs seek an uplift on the 2B costs at the rate of 75 per cent.

[3]                  Counsel also seeks $2,000 plus GST to cover the costs preparing of the submissions in respect of costs.

Analysis

[4]Rule 14.6 High Court Rules 2016 provides that:

(1)… the court may make an order—

(b) that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).

…

(4)The court may order a party to pay indemnity costs if—

(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or

(b)the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or

(c)costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or

(d)the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or

(e)the party claiming costs is entitled to indemnity costs under a contract or deed; or

(f)some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

[5]                  The assessment of the quantum of indemnity costs is by way of a reasoned determination, rather than the Court ordering the amount of the party’s invoiced legal fees without scrutiny, especially where the amount of money involved is substantial.2 A Court may order indemnity costs where particular misconduct adds, unnecessarily to the amount of time taken to deal with the matters.3

[6]                  The plaintiffs submit that the defendant acted vexatiously, frivolously, improperly, or unnecessary in continuing to defend the proceeding, namely:

(a)Commencing his defence having already misled the liquidators in his examination under oath pursuant to s 261 of the Companies Act.

(b)Continuing his defence with briefs of evidence setting out positions that were wrong, and that have been noted in the substantive judgment.

(c)Failing to pursue his defence with any appropriate analysis, even of his own, let alone any independent expert evidence.

(d)Being unreceptive to any discussion regarding his case against him despite detailed exchanges between counsel for the parties, on a "without prejudice save as to costs basis".

(e)The judgment largely followed the analysis that counsel provided to the defendant's counsel before the most significant part of the costs were incurred.

[7]                  In addition, I discussed at [32] — [71] in the substantive decision, the extent of the defendant’s actions in misleading the Court and the liquidators.4 This was also relied on by the plaintiffs in support of their application.

2      Edel Metals v Geier Ltd [2018] NZCA 494; Black v ASB Bank [2012] NZCA 384.

3      Bradbury v Westpac Banking Corporation [2009] NZCA 324, [2009] 3 NZLR 400 endorsing Goddard J's adoption in Hedley v Kiwi Co-operative Dairies Ltd (2002) 16 PRNZ 694 (HC) at

[11] of Sheppard J's summary in Colgate Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248.

4      Classic Flights Ltd (in liquidation), Laing and Laing v Li, above n 1.

[8]                  I acknowledge that Mr Guest, on behalf of the plaintiffs, notified the defendant’s counsel, Mr Gresson, on 25 October 2024 as to the plaintiff’s concerns about the defendant’s relevant conduct. In an email dated 25 October 2024, Mr Guest informed Mr Gresson:

We are frankly perplexed as to why your client would want to take this to a hearing. That assessment became stronger on seeing the briefs of evidence. His evidence is largely based on misunderstanding the nature of the claim. His wife's evidence (8 paragraphs) adds nothing. Kevin Li's evidence cannot be admitted as expert evidence because of the lack of independence, and in any event does not address the subject matter for experts, being the content of usual light aircraft leasing in New Zealand.

[9]                  The defendant, also, ignored the proposals from the plaintiffs to settle the matter and instead, took the matter to a defended hearing.

[10]              In light of the plaintiffs’ submissions and my findings at [32] — [71] in Classic Flights Ltd (in liquidation), Laing and Laing v Li,5 I am satisfied the defendant has acted vexatiously, frivolously, improperly, or unnecessarily in defending the proceeding. Accordingly, this is a case where an award of indemnity costs is appropriate. Having carefully reviewed the quantum of the plaintiffs’ claim for indemnity costs I am satisfied that the sum claimed represents the actual and reasonable costs incurred.

Outcome

[11]              The plaintiffs are entitled to costs in the sum of $98,015 and $2,000 plus GST to cover the costs of the submissions on costs. Disbursements and other expenses are to be determined by the Registrar.

Churchman J

5      Classic Flights Ltd (in liquidation), Laing and Laing v Li, above n 1.

Solicitors:

Solomons, Dunedin for Plaintiff

Todd & Walker Law, Queenstown for Defendant