Hemi v Tyler - [2024] NZHC 348

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-419-243

[2024] NZHC 348

BETWEEN
HOHUA WARREN HEMI

Plaintiff (discontinued)/Counterclaim Defendant

AND

MICHAEL STEVEN TYLER

Defendant (discontinued / Counterclaim Defendant

AUTO NET
First Third Party

ROBERT DEVON STONE

Second Third Party

Hearing: 13 February 2024

Counsel:

JA MacGillivray for Counterclaim Defendant MD Branch for Counterclaim Plaintiff

DP Shaw for First Third Party
SD Campbell for Second Third Party

Judgment:

28 February 2024

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 28 February 2024 at 12 midday Pursuant to Rule 11.5 of the High Court Rules.

…………………..
Registrar/Deputy Registrar

Solicitors:
Tompkins Wake, Hamilton, Harkness Henry, Hamilton, Wynn Williams, Christchurch, McCaw Lewis, Hamilton,

HEMI v TYLER [2024] NZHC 348 [28 February 2024]

Introduction

[1] The plaintiff, Houhua Hemi (Mr Hemi) and Robert Stone (Mr Stone) began a business relationship around 1991, purchasing used cars in Japan and exporting them to New Zealand and elsewhere in the world.

[2] Over time, Mr Hemi and Mr Stone developed a complex business structure, including: a company incorporated in the Cayman Islands, Auto Net; iComm International Incorporated based in the Philippines; Autoterminal New Zealand Ltd, now in liquidation (ATNZ); and IBC Japan Co Ltd (IBC).

[3] Michael Tyler (Mr Tyler) was employed in the business from around 1999, and from 2009 he held shares in ATNZ on trust for Auto Net, with Mr Hemi and Mr Stone as the ultimate beneficial owners.

[4] Mr Hemi and Mr Stone fell out. In this proceeding, Mr Hemi alleges that Mr Tyler breached fiduciary duties owed to him personally, as a result of Mr Tyler essentially siding with Mr Stone in the dispute.

[5] The background facts and pleadings are more complicated than the summary I have given, however my summary will suffice for present purposes.

[6] Mr Tyler joined Auto Net and Mr Stone as third parties, seeking an indemnity for costs incurred in defending Mr Hemi’s claim. Mr Hemi has discontinued all claims against Mr Tyler. In a separate proceeding, IBC has brought claims against Mr Tyler. Mr Tyler’s third-party claims against Auto Net and Mr Stone in this proceeding have been transferred and consolidated into that other proceeding, CIV-2023-419-42.

[7] The only outstanding issue in this proceeding is an award of costs to Mr Tyler following Mr Hemi’s discontinuance. Mr Hemi concedes that Mr Tyler is entitled to an award of costs under r 15.23 of the High Court Rules 2016 (HCR). The parties agree that an award of 2B costs would be $24,856. Any costs that relate to Mr Tyler’s third-party claims will be determined in CIV-2023-419-42.1

1 Minute of Associate Judge Brittain dated 9 January 2024 in CIV-2023-419-042.

Mr Tyler’s position

[8] Counsel for Mr Tyler submitted that there is a “presumption of unreasonableness following a discontinuance”. Counsel for Mr Tyler characterised the claim as hopeless from the start. Counsel further submitted that the discovery exercise was extraordinary and complicated by Mr…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Hemi v Tyler

Details

AGLC: Hemi v Tyler [2024] NZHC 348
Case: [2024] NZHC 348
Decision Date: 28 February 2024

CaseChat Overview and Summary

In Hemi v Tyler, the plaintiff, Houhua Hemi, discontinued his claims against Michael Tyler before the trial, leading to an application for costs by Tyler. The dispute originated from a complex business relationship between Hemi, Robert Stone, and Tyler, involving multiple entities such as Auto Net and Autoterminal New Zealand Ltd. Hemi alleged that Tyler breached fiduciary duties by siding with Stone during their business dispute. Tyler, in turn, sought an indemnity for costs incurred in defending Hemi's claims. The only remaining issue was the assessment of costs following Hemi's discontinuance.

The court was required to determine the appropriate level of costs Tyler was entitled to under Rule 15.23 of the High Court Rules 2016, which mandates that a discontinuing plaintiff must pay the defendant's costs up to the point of discontinuance. Tyler argued for indemnity costs, claiming the claim was hopeless and that Hemi unreasonably challenged his discovery claims. Hemi, on the other hand, contended that there was no presumption of unreasonableness and that the usual principles for awarding costs should apply.

The court found that discontinuance at the interlocutory stage was not unreasonable and that Hemi did not contribute unnecessarily to the proceeding's expense. While the discovery process was complex and costly, the court attributed this to the inherent difficulties in the relationships between the parties rather than Hemi's actions. The court justified an increase in costs for the discovery steps under Rule 14.6(3)(a), awarding Tyler 2C costs plus a 50% uplift for these steps, resulting in a total award of $44,366. The court declined to stay execution of the costs order, noting that issues between Tyler and Autoterminal New Zealand Ltd were not the subject of this proceeding.

Orders