Han v Xue
[2023] NZHC 1002
•2 May 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1717
[2023] NZHC 1002
BETWEEN WENNING HAN
First Plaintiff
YUNYUE ZHU
Second PlaintiffAND
JINXING XUE
Defendant
Hearing: On the papers Appearances:
Patrick J Shanahan-Pinker for the First Plaintiff M G Kirkland for the Second Plaintiff
Andrew Gilchrist for Non-Parties
Paul Dalkie and Lyn Nicholson for Dyer Whitechurch non-partyJudgment:
2 May 2023
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Costs]
This judgment was delivered by me on 2 May 2023 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
K3 Legal Limited (Patrick Shanahan-Pinker/M G Kirkland), Auckland, for the Plaintiffs Douglas M A Burgess, Auckland, for Non-Parties (Ethnik Krasniqi and Stuart Robertson) Dyer Whitechurch (Lyn Nicholson), Auckland, for Non-Party
Copy for:
Andrew Gilchrist, Southern Cross Chambers, Auckland, for Non-Parties (Krasniqi and Robertson) Paul Dalkie, Auckland, for Dyer Whitechurch, Non-Party
HAN v XUE [2023] NZHC 1002 [2 May 2023]
Introduction
[1] On 17 March 2023 by consent the Court granted orders in respect of the first plaintiff’s application for non-party discovery orders against the following parties (Orders):
(a)Abbotts Investment Limited (AIL);
(b)Stuart Douglas Robertson (Mr Robertson);
(c)Dyer Whitechurch (Dyer Whitechurch);
(d)Burcher Law (Burcher Law);
(e) Ethnik Krasniqi (Mr Krasniqi). (together, the Non-Parties)
[2] The first plaintiff’s application was supported by the second plaintiff but was opposed by Dyer Whitechurch, Mr Krasniqi and Mr Robertson (the Opposing Non- Parties).
[3] At [14] of the Orders, the Court directed the parties file submissions on the issue of costs and noted that:
The applicant has been largely successful in obtaining the orders sought in his application. Accordingly, my preliminary view is that the applicant is entitled to costs on a 2B basis together with disbursements. However I direct that counsel for the applicant is to file a memorandum as to costs (not exceeding five pages) within 10 working days of the date of these consent orders. Counsel for the respective third parties are to file any response (not exceeding five pages) within five working days of receipt of counsel for the applicant’s memorandum. Costs will then be determined on the papers.
Procedural history
[4] On 10 June 2022, the first plaintiff filed its application for non-party discovery and this application was limited to seeking documents from Dyer Whitechurch.
[5] On 20 October 2022, the first plaintiff filed an amended application for non- party discovery and this amended application expanded the scope of the application to include all the Non-Parties.
[6] On 2 March 2023, Dyer Whitechurch filed a notice of opposition. This opposition was filed out of time, four working days before the hearing date of 8 March 2023.
[7] On 6 March 2023, Mr Krasniqi and Mr Robertson filed a notice of opposition two days prior to the hearing.
Principles as to costs
[8] Rule 14.2(a) of the High Court Rules 2016 states that the party who fails with respect to an interlocutory application should pay costs to the party who succeeds.
[9]Rule 14.8 of the High Court Rules provides:
14.8 Costs on interlocutory applications
(1) Costs on an opposed interlocutory application, unless there are special reasons to the contrary, --
(a)must be fixed in accordance with these rules when the application is determined; and
(b)become payable when they are fixed.
[10]Rule 8.22(3) of the High Court Rules provides that :
8.22 Costs of discovery
…
(3) If an order is made under rule 8.20(2) or 8.21(2), the Judge may, if the Judge thinks it just, order the applicant to pay to the person from whom
discovery is sought the whole or part of that person’s expenses (including solicitor and client costs) incurred in relation to the application and in complying with any order made on the application.
Submissions for the first and second plaintiffs
[11] Counsel for the first and second plaintiffs has filed submissions dated 31 March 2023 and is seeking costs on a 2B basis together with disbursements against the Opposing Non-Parties. Detail of the costs sought by the first and second plaintiffs are set out in the schedule to the first and second plaintiffs’ counsel’s memorandum.
[12] Counsel submits that the application related to discovery of documents and other information held by the Non-Parties which directly related to the central issue in the substantive proceeding and orders were required so the parties could determine on what basis the first plaintiff and the defendant entered into a loan agreement, the nature of the obligation owed by the first plaintiff to the defendant, and the validity/enforceability of that obligation.
[13] Counsel submits that prior to the substantive proceeding being commenced, the first plaintiff made a number of unsuccessful attempts to obtain information that was sought in the orders from the Opposing Non-Parties, in particular:
(a)between May and July 2021, the first plaintiff made requests to obtain the relevant documentation and information held by Dyer Whitechurch;
(b)on 11 June 2021, the first plaintiff engaged a private investigator to locate Mr Krasniqi and Mr Robertson. Neither person could be located.
[14] Counsel for the first and second plaintiffs submit that it is appropriate, and in the interests of justice, that costs be awarded to the first and second plaintiffs in respect of their application on the following grounds:
(a)had the Opposing Non-Parties engaged in constructive discussions with the plaintiffs, both prior to the hearing and the application being made, then the plaintiffs could have avoided incurring needless costs;
(b)at the very least, had the Opposing Non-Parties filed their opposition and affidavits in time, the parties would have in all likelihood reached an agreement in respect of the application and so avoided the costs to proceed to a hearing;
(c)there was no justifiable reason as to why the Opposing Non-Parties filed their opposition out of time and the Opposing Non-Parties had been served well before the hearing date;
(d)the plaintiffs’ application was appropriately made in the circumstances and was required to determine key issues in the proceeding and as recorded in the Orders was largely successful;
(e)that the parties ultimately agreed to discovery by consent is evidence that the plaintiffs’ position was correct and the application was appropriately sought;
(f)there were no good grounds for the Opposing Non-Parties to oppose the application, as demonstrated by the fact that Mr Krasniqi and Mr Robertson agreed to the plaintiffs being provided with the documents held by Dyer Whitechurch.
Submissions in opposition by Dyer Whitechurch
[15] Dyer Whitechurch acted for the first Non-Party, AIL. Counsel for Dyer Whitechurch submits that there was extensive correspondence prior to the application between lawyers for the first plaintiff, and Dyer Whitechurch in relation to the allegation that Dyer Whitechurch held a signed shareholders’ agreement which Dyer Whitechurch on numerous occasions denied holding.
[16] Counsel submits that Dyer Whitechurch’s position is that the documents sought belonged to AIL and without authority was not in a position to provide them and accordingly Dyer Whitechurch should not have been a party to the discovery application as they could not have provided the documents without either the client’s consent or a Court order.
[17] Counsel submits that r 8.22(3) applies where the Court is considering costs of successfully opposing a non-party discovery application.1 Counsel submits that Dyer Whitechurch acted reasonably as:
(a)the initial thrust of the plaintiffs’ enquiries was to obtain a copy of the shareholders’ agreement which Dyer Whitechurch did not have;
(b)the application was then amended and Dyer Whitechurch set out in an affidavit the documents that they had, and confirmed it did not have the client’s authority to provide them but would abide by the decision of the Court;
(c)accordingly, Dyer Whitechurch has not been ordered to do anything it had not already agreed to do and could not do without either client authority or Court order.
[18] Counsel for Dyer Whitechurch refutes the allegation that if Dyer Whitechurch had submitted its notice of opposition earlier then agreement may have been reached between the parties and the hearing avoided. Counsel submits that Dyer Whitechurch could not have changed its position without authority from the client to provide the documents, and that authority was not forthcoming. Accordingly, the filing of its notice of opposition and affidavit in support were steps Dyer Whitechurch was entitled to take.
[19] Counsel for Dyer Whitechurch submits that, in all the circumstances, Dyer Whitechurch’s response to the non-party’s discovery application was reasonable and
1 Robinson v Beaman & Ors [2022] NZHC 3590 at [6], citing AFI Management Pty Ltd v Lepionka & Co Investments Ltd [2018] NZHC 892 at [4].
it took steps it was entitled to, and should not be subject to a costs order. Costs should lie where they fall.
Submissions on behalf of Mr Krasniqi and Mr Robertson
[20] Mr Andrew Gilchrist, counsel for Mr Krasniqi and Mr Robertson, made the following submissions.
[21] He points to r 8.22(3) and contends the usual principle is that the party who applies for non-party discovery should pay the non-party’s costs, relying on Churchill Group Holdings v Aral Property Holdings Ltd.2 He further relies on the statement by McGechan J in Clear Communications Ltd v Telecom Corporation of NZ Ltd:3
Third parties brought in by a sidewind should not be left meeting their own expenses. Those costs are of course to be reasonable in the circumstances.
[22] Mr Gilchrist submits that Mr Krasniqi and Mr Robertson have acted reasonably in relation to the application as:
(a)neither of the parties is resident in New Zealand, they did not evade service and were served as a result substituted service orders. In Mr Krasniqi’s case his affidavit evidence shows he only actually became aware of the application on 28 February 2023 and immediately took steps. The modes of substituted service had not actually brought the application to his attention. In Mr Robertson’s case, while he received the documents on Facebook he was not able to access them, they were overlooked for a period of time, and he immediately then engaged counsel.
(b)When the notices of opposition were filed, the Non-Parties had a co- operative approach to the matter and the matter was subsequently resolved by consent.
2 Churchill Group Holdings Ltd v Aral Property Holdings Ltd HC Auckland CIV-2001-404-2302, 3 August 2005.
3 Clear Communications Ltd v Telecom Corporation of NZ Ltd (1994) 8 PRNZ 2000 (HC).
(c)Neither of the Non-Parties have any records themselves and are co- operating with regard to access; neither were approached prior to the bringing of the application.
[23] On behalf of Mr Robertson, Mr Gilchrist submits that the parties to the proceeding are not acquaintances of his, he has never negotiated with them or communicated with them, has not met them, and has no records relating to the transactions.
[24] Given the substituted service order, the late bringing of the matter to the attention of the Non-Parties, and the co-operative stance taken by them after they were aware of the application, Mr Gilchrist submitted that there should be no order against the Non-Parties, and costs should lie where they fall.
Result
[25] Having considered the submissions of the various parties, as summarised above, I am of the view that costs should lie where they fall. The reasons for this are the result of balancing the following factors:
(a)the rule in 8.22(2) that the party who fails in respect of an interlocutory application should pay the costs of the party who succeeds, against r 8.22(3) and the general principle that the applicant should pay the non-party costs in respect of a non-party discovery order;
(b)attempts by the plaintiffs to obtain the information prior to the application, although those attempts in respect of Dyer Whitechurch were initially focused on obtaining a signed shareholders’ agreement, which Dyer Whitechurch did not hold;
(c)Dyer Whitechurch’s position being reasonable that the documents it did hold could not be released without a Court order or authority of one or other of the directors of AIL, and such authority was not available. Accordingly Dyer Whitechurch taking the steps it did to protect its position was reasonable;
(d)the delays in the applications coming to the attention of Mr Krasniqi and Mr Robertson due to substituted service and other factors summarised in the submissions above, led to the late filing of opposition notices which, if filed earlier, may have led to an agreed position (which was ultimately achieved) without the need for the hearing and submissions prepared by the plaintiffs in advance of that hearing;
(e)the Non-Parties consenting to orders following the commencement of the hearing.
Orders
[26]Accordingly, I make an order that costs should lie where they fall.
…………………………….. Associate Judge Taylor
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