Fuati v Peng

[2020] NZHC 2466

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-000848

[2020] NZHC 2466

BETWEEN

MUSABAYOU FUATI

First Plaintiff

JUN JIN
Second Plaintiff

AND

YUCHEN PENG

First Defendant

ZUORU JIN

Second Defendant

Hearing:

On the papers

Appearances:

Plaintiffs in person

D Zhang for Defendants

Judgment:

22 September 2020

JUDGMENT OF LANG J

[on costs]

This judgment was delivered by me on 22 September 2020 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

Solicitors:

Amicus Law, Auckland Copy to:

Plaintiffs

FUATI v PENG [2020] NZHC 2466 [22 September 2020]

[1]     This file has been referred to me for determination of costs on the substantive proceeding following its discontinuance on 21 July 2020. Costs in relation to earlier judgments dealing with freezing orders and discovery issues (the discovery judgment) have already been fixed.1

[2]     Rule 15.23 of the High Court Rules 2016 provides that where a plaintiff discontinues a proceeding the plaintiff must, unless the defendant agrees or the Court orders otherwise, pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

[3]     The defendants seek costs on a category 2B basis for all steps taken in the proceeding other than an interlocutory application that they filed on 8 July 2020. They say they should receive indemnity or increased costs on that application. They also say the Court should now reverse an order for costs made by Courtney J against the defendants2 following a judgment delivered in the plaintiffs’ favour on 17 August 2018.3

[4]     The plaintiffs contend that costs should lie where they fall. They submit they have a strong claim against the defendants and have only discontinued the proceeding because they no longer have the resources to continue it. They also consider it to be grossly unfair that the defendants have been able to meet the costs of their defence using funds belonging to the plaintiffs.

[5]     I understand the plaintiffs’ concerns, but I do not consider they amount to a sufficient reason to depart from the principle set out in r 15.23. In particular, it is not possible given the stage at which the plaintiffs discontinued the proceeding to reach any firm conclusion regarding the strength or otherwise of their claims. Subject to the Court’s overriding discretion as to costs the defendants are therefore entitled to costs on steps taken in the substantive proceeding up until the discontinuance.

[6]     I consider first the steps for which the defendants seek costs on a category 2B basis.

1      Fuati v Peng [2018] NZHC 3200; Fuati v Peng [2020] 1581; Fuati v Peng [2020] NZHC 2150;

2      Fuati v Peng [2018] NZHC 3200.

3      Fuati v Peng [2018] NZHC 2134.

Steps for which the defendants seek costs on a category 2B basis

The first defendant

[7]     I allow all steps claimed in Schedule 1 to the memorandum of counsel for the defendants dated 18 August 2020 other than those to which I now refer.

Application for leave to appeal to Court of Appeal

[8]     The defendants seek costs on an application seeking leave to appeal against the judgment of Courtney J delivered on 17 August 2018. The application was filed on 19 October 2018 but does not appear to have progressed further. If that is correct no costs should be permitted in respect of this item.

Notice of Opposition filed on 19 October 2018

[9]     On 13 December 2018 Jagose J delivered a judgment in which he granted ancillary orders sought by the plaintiffs.4 The plaintiffs were therefore the successful party in this application and would ordinarily be entitled to costs on it. As a result, I do not consider the defendants should be entitled to costs on any steps taken in relation to it. The notice of opposition filed on 19 October 2018 appears to relate to this application and, if that is correct, I decline to award costs in relation to it. If I am wrong, counsel for the defendants has leave to file a memorandum setting out the correct position.

Preparation of submissions for hearing on 12 September or 5 December 2018

[10]   I cannot find any record of a hearing on either 12 September or 5 December 2018. Subject again to correction by counsel for the defendants I do not allow this item.

The second defendant

[11]   I allow costs as claimed for the steps set out in Schedule 2 to the memorandum of counsel for the defendants dated 18 August 2020.

4      Fuati v Peng [2018] NZHC 3283.

Costs order made by Courtney J on 6 December 2018

[12]   On 17 August 2018 Courtney J dismissed an application by the first defendant, Ms Peng, seeking a discharge of the freezing orders made in relation to her assets.5 In a judgment delivered on 6 December 2018 Courtney J required Ms Peng to pay costs on the application calculated on a category 2B basis together with disbursements as fixed by the Registrar.6 The defendants contend the Court should now reverse the award of costs and award costs on the application in their favour.

[13]   I see no basis on which to revisit this issue. The fact that the plaintiffs have now discontinued the proceeding does not mean the defendants effectively succeeded in relation to the application determined by Courtney J or that it was ultimately found to be without merit. Nor do I consider I have jurisdiction to set aside the order merely because the plaintiffs have now discontinued the proceeding. The only way in which this order could be challenged now is by way of application for leave to appeal to the Court of Appeal.

Indemnity costs on interlocutory application filed on 8 July 2018

[14]   On 8 July 2018 the defendants filed an application seeking an order that the proceeding be struck out on the basis that the plaintiffs had failed to comply with directions made by Walker J in the discovery judgment. In the alternative, the defendants sought “unless orders” if the plaintiffs did not comply with those directions forthwith. The defendants also sought security for their costs, discharge of the existing freezing orders in relation to Ms Peng’s assets and directions designed to progress applications for non-party discovery they had filed earlier.

[15]   The plaintiffs did not appear when the defendants’ applications were first called in the Duty Judge List on 14 July 2020. The applications were called again the following day and on this occasion the plaintiffs did appear. They sought to reinstate an application for discovery they had filed earlier. The presiding Judge then made timetable orders for both sets of applications and allocated them a fixture on 17 August 2020. She also made amended pre-trial directions because the plaintiffs had failed to

5      Fuati v Peng, above n 3.

6      Fuati v Peng, above n 2.

serve  their  evidence  in  accordance  with  the  existing  timetable.     The plaintiffs subsequently obtained leave to discontinue the proceeding on 21 July 2020.

[16]   Counsel for the defendants submits the plaintiffs should be required to pay indemnity costs on the defendants’ application because they acted in flagrant disregard of directions given by the Court and this caused the defendants significant additional expense.

[17]   I do not accept this argument because, even accepting the assertions made by the defendants are correct, the plaintiffs’ conduct was not sufficient to justify an award of indemnity costs in terms of authorities such as Bradbury v Westpac Banking Corporation.7 In addition, the plaintiffs dispute the defendants’ suggestion that they failed to comply with their discovery obligations under the discovery judgment. It is not possible in the present context to determine where the truth lies in relation to that issue.

[18]   It also needs to be remembered that the application sought security for the defendants’ costs. The defendants had not raised that issue previously. It also sought directions designed to progress the defendants’ application for non-party discovery. The application was therefore not prompted solely by issues relating to the plaintiffs’ conduct.

[19]   I am therefore satisfied that justice will be done if the defendants receive costs on this application calculated on a category 2B basis.

Disbursements

[20]   The defendants are entitled to disbursements as sought in the memorandum of their counsel dated 18 August 2020.

Lang J

7      Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400, (2009) 19 PRNZ 385 (CA) at [27].