Dong SH Auckland Limited v WorkSafe New Zealand

[2024] NZHC 935

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CRI-2023-404-000338

[2024] NZHC 935

DONG SH AUCKLAND LIMITED

v

WORKSAFE NEW ZEALAND

Hearing:	On the papers at Auckland
Judgment:	26 April 2024

JUDGMENT (NO.2) OF POWELL J

[Costs]

This judgment was delivered by me on 26 April 2024 at 12.00 pm pursuant to

r 11.5 of the High Court Rules

…………………..

Registrar/Deputy Registrar

DONG SH AUCKLAND LIMITED v WORKSAFE NEW ZEALAND [2024] NZHC 935 [26 April 2024]

[1]    On 18 March 2024, I dismissed an appeal by Dong SH Auckland Limited (in liquidation) and upheld its conviction in the District Court on three charges under the Health and Safety at Work Act 2015 (“HSWA”).1

[2]    Leave was granted for WorkSafe to seek costs on the appeal and to provide submissions on the appropriate entity or individuals against whom costs are sought.2

[3]    WorkSafe  has subsequently filed a memorandum seeking costs pursuant to    s 152(1) of the HSWA seeking costs in the sum of $7,967.99 against the appellant, being its actual costs, and the appellant has confirmed that it does not dispute the costs sought.

[4]In addition, however, Ms Hogan has noted on behalf of WorkSafe:

…

4.2However, in a memorandum in this Court dated 31 October 2023 the appellant’s liquidator advised the appellant was indemnified in

respect of appeal costs by its director, Linsheng Huo.

4.3The Court has jurisdiction to order costs against a non-party director in place of a company in a case like this where the director has funded and controlled the proceeding.

4.4Mr Huo is the sole director and shareholder of the appellant and was driving the appeal.

4.5In those circumstances your Honour may be minded to make a costs award against the appellant and Mr Huo jointly and severally.

(citations and footnotes omitted)

[5]    No submissions have been made on behalf of Mr Huo personally in relation to costs.

Discussion

[6]    Having considered the costs claimed by WorkSafe and noting the lack of opposition by the appellant or Mr Huo I am satisfied it is appropriate to award the

1      Dong SH Auckland Ltd v WorkSafe New Zealand [2024] NZHC 575.

2 At [19].

indemnity costs as sought against the appellant. As Ms Hogan noted, I concluded in my substantive decision that the appeal was without merit,3 and moreover:

(a)appeared to be moot;4

(b)the grounds of appeal advanced by the appellant substantially ignored a previous decision of this Court and the trial evidence;5

(c)the submissions in support of the appeal verged on being misleading and/or disingenuous.6

[7]    In those circumstances, I am satisfied that the quantum sought is just and reasonable in terms of s 152(1) of the HSWA.

[8]    As to whether an order  should  be  made  against  Mr  Huo  personally,  as Ms Hogan submitted, the relevant principles are those set out in the Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No.2).7 In that case, the Privy Council started from the position that, other than where non-parties act in concert, a non-party could not ordinarily be made liable for costs if the costs would have been incurred even without the non-party’s involvement.8

[9]    From that starting point the Privy Council set out the principles by which a non-party could be held liable for costs as follows:9

…

Although costs orders against non-parties are to be regarded as “exceptional”, exceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question… is whether in all the circumstances it is just to make the order.

…

3 At [11].

4 At [6].

5      At [12]–[15].

6 At [11].

7      Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No.2) [2004] UKPC 39, [2005] 1 NZLR 145.

8 At [20].

9 At [25].

…[T]he discretion will not [generally] be exercised against “pure funders”…“those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course”.

…

Where, however, the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, [the non- party] will pay the successful party’s costs.

(citations omitted)

[10]   After considering a number of cases providing texture to these principles, the Privy Council stated:10

In the light of these authorities their Lordships would hold that, generally speaking, where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence or appeal fails. As explained in the cases, however, that is not to say that orders will invariably be made in such cases, particularly, say, where the non-party is himself a director or liquidator who can realistically be regarded as acting rather in the interests of the company (and more especially its shareholders and creditors) than in his own interests.

[11]   Applying these principles, subsequent New Zealand cases have confirmed that it is not enough that a non-party was the “guiding mind” of an unsuccessful litigant that subsequently becomes insolvent, “something more” is required. As Downs J commented in Minister of Education v H Construction North Island Ltd:11

New Zealand cases emphasise the need for “something more” by the non-party, otherwise the rule could be overbroad in an economy populated by smaller, closely held companies, especially when a director (and owner) uses her or his own capital to fund litigation their insolvent company could not otherwise conduct. The “something other” element is not closed. Impropriety suffices but is unnecessary.

(footnotes omitted)

[12]   Applying these principles, it is clear that the something extra identified by Downs J is present in this case. It is indeed clear from memoranda filed by the

10 At [29].

11     Minister of Education v H Construction North Island Ltd (in rec and liq) [2019] NZHC 1459 at [43].

appellant that the appeal would not have proceeded but for the support of Mr Huo. It appears from those memoranda that Mr Huo provided an indemnity to the liquidator in respect of any costs ordered by the Court. At the same time, the time taken to effect this indemnity resulted in an adjournment of the original fixture. In the circumstances and noting the terms of indemnity given by Mr Huo have not been provided to this Court, I have no hesitation in concluding that both the appellant and Mr Huo should be jointly and severally liable for the costs incurred by WorkSafe on the appeal.

Decision

[13]   Costs in the sum of $7,967.99 in favour of WorkSafe are awarded jointly and severally against the appellant and Mr Huo.

Powell J