Hong v Zhao HC Auckland CIV-2011-404-1838

[2011] NZHC 905

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-1838

UNDER  the District Court Act 1947, s 72

IN THE MATTER OF     an appeal from the District Court

BETWEEN  BOON GUNN HONG Appellant

ANDRICHARD ZHAO AND ANTHONY VINCENT RAM

Respondents

Hearing:         9 August 2011

Counsel:         B G Hong (In person)

F Deliu for Respondents

Judgment:      11 August 2011

JUDGMENT OF MILLER J

[1]      Mr Boon Hong appeals an award of costs against him.  Costs were awarded on an indemnity basis, which is not in dispute, but the quantification of the award is.

[2]      In mid-2009 Xue Tao Ma and Yin Bo Ma engaged Messrs Zhao and Ram, the present respondents, as counsel in leaky home litigation against Eva Ho, who had sold them the property, Mr Boon Hong, who acted for the Mas, and Grimshaw and Co, who had acted for the Mas in contemplation of proceedings arising out of the purchase.

[3]      Ms Ho and Grimshaw and Co filed strike-out applications which, I am given to understand, were ultimately successful.  Mr Boon Hong did not take that course

initially, a point to which I return later.   He chose instead to file a counterclaim

BOON GUNN HONG V RICHARD ZHAO AND ANTHONY VINCENT RAM HC AK CIV-2011-404-1838 11

August 2011

against the respondents personally, alleging incompetence and seeking costs on an indemnity basis at an hourly rate of $350.

[4]      Messrs  Zhao  and  Ram  moved  to  strike  the  application  out.    Mr  Deliu appeared for them.   After a series of delays which appear to have been the responsibility of Mr Boon Hong, Judge Sharp granted the strike-out application on

20 December 2010.   She directed that indemnity costs were payable by Mr Boon

Hong.   In  a second  judgment, delivered  on 17 March  2011, she fixed costs at

$17,259.41 inclusive of disbursements.   From that latter judgment Mr Boon Hong brings this appeal and Messrs Zhao and Ram have cross-appealed.

[5]      Because the Judge’s decision to award indemnity costs is not in issue, I need not say much about it.  In short, the Judge found that it was inappropriate to seek costs against counsel in the form of a counterclaim.   It did not amount to relief related to or connected with the original subject matter of the proceeding, and the claim  did  not plead  on  what  legal  basis  the respondents  could  be liable to  the appellant.  Nor did Mr Boon Hong have an appropriate ground of opposition to the application  to  strike  out  the  counterclaim.    The  correspondence  indicated  that Mr Boon Hong had wilfully ignored both the law and invitations to withdraw the counterclaim.  He plainly took the respondents’ representation of the plaintiff’s as a personal slight against him.  The Judge noted a suggestion that Mr Boon Hong could be  forgiven  to  some  extent  because  he  is  not  a  litigation  lawyer.    The  Judge dismissed that argument but noting that Mr Boon Hong has been a solicitor for some considerable time and is no stranger to litigation;   he had appeared in the District Court more times than the Judge cared to remember.  He should have known better, and he had been given every opportunity to withdraw the counterclaim.

[6]      Following that judgment extensive memoranda were filed relating to costs. In her second judgment the Judge characterized the affair as a vendetta between Messrs Deliu and Boon Hong, and stated that the Court would no longer tolerate “gratuitous mudslinging” between the two of them.  She recorded that the issue was whether  the  claimed  costs  of  $33,110.73  were  reasonable.     Notwithstanding Mr Deliu’s persuasive  arguments, she considered that they were not.    The only matter on which indemnity costs were awarded was the application of two non-

parties to have the counterclaim against them struck out.  All that Mr Deliu must do was to examine whether a counterclaim could be issued against non-party lawyers for their involvement as counsel in a substantive proceeding.  Mr Deliu had taken a “belts and braces” approach, ranging far wider than the immediate issue.  Some of his attendances were accordingly unnecessary.   She declined to traverse an issue raised by Mr Boon Hong in his memoranda about whether the non-parties were employees of Mr Deliu, noting there was no evidence on the point.  She assessed the amount reasonably payable at one half of the claim.

[7]      The appeal alleges that no proper costs assessment was made, that the Judge failed to take into account relevant information, and that there was a miscarriage of justice.   Other grounds, described as ancillary, are also raised.   The cross-appeal contends that full indemnity costs were appropriate because the counterclaim was wholly without merit and because various relevant considerations were not taken not account, notably the novelty of Mr Boon Hong’s claim and the necessary evidence and arguments that were put forward.

[8]      I begin by noting the significance of the unchallenged decision to award indemnity costs.  This is one of those cases in which the party has conducted himself so badly as to justify a departure from scale costs, by advancing a claim that ought never have been mounted and then prolonging it by resisting the strike-out.[1]    Such behaviour almost inevitably means that the successful party’s costs will be higher than they need have been.

[1] Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [24]-[29].

[9]      I next note that costs are in the discretion of the District Court under r 4.1 of the District Court Rules 2009.  Further, where the Court departs from scale costs it fixes quantum as a matter of overall impression, balancing considerations such as the importance  of  the  issue,  the  amount  at  stake,  the  amount  of  work  reasonably

required, the quality of the work, and any other considerations relevant to the case.[2]

The decision being discretionary, this Court will not interfere on appeal unless it has been shown that the Court acted on a wrong principle or took into account an

irrelevant consideration or ignored a relevant one, or was plainly wrong.

[2] Cornish v Beazley Homes Ltd (1991) 4 PRNZ 201 (HC) at 204.

[10]     The District Court in this case followed the orthodox approach of inviting memoranda on costs and dealing with costs on the papers.   Neither party filed evidence,  or  sought  an  oral  hearing.    The  Court  had  before  it  details  of  the attendances and costs claimed and began with that, but ultimately fixed the costs as a matter of impression.

[11]     Mr Boon Hong’s first ground of appeal was that no proper assessment was made because the claim failed to stipulate which person attended to each work item and at what rate and the actual time spent on each item with a description of the nature of the work done and for what purpose.   Included in the claim were items which Mr Boon Hong challenged as being false.  The Judge simply and arbitrarily awarded half of the fees instead of making her own assessment.  In oral argument he contended that the costs claimed must be predictable, and specifically that they must be particularised by reference to the schedules in the Rules even if the amounts claimed exceed those available under the Rules.

[12]     I reject these submissions as misconceived, for several reasons.   First, the Judge  did  have  before  her  a  breakdown  which  itemised  the  costs  claimed  by reference to work done at any given time.   The number of hours spent were not specified but are simply derived from the hourly rate.   Second, it is true that predictability is an important consideration when it comes to costs.   That is one reason why the court is slow to depart from scale.  But where indemnity costs are warranted the court begins with actual costs incurred, adjusting them as appropriate

to ensure that the award is objectively reasonable.[3]   Almost by definition indemnity

costs are not easily predicted ex ante.  Predictability for the unsuccessful party also matters less since he is the author of his own exposure.  For the reason given in [8] above the Schedule is of little relevance.  Third, Mr Deliu charged his time at $200 an hour, a somewhat lower rate than normal and lower than that which Mr Boon Hong had claimed in his counterclaim.   Fourth, while the Judge began with the amount she properly fixed the costs as a matter of impression.  She was not required

to itemise the award as she would have done had costs been fixed according to scale.

[3] Bradbury v Westpac Banking Corporation (2008) 18 PRNZ 859 (HC) at [17], [204]-[209].

[13]     With respect to the claim that the bill has been padded, I accept Mr Deliu’s submission that there is no evidence of it.   As he said, that connotes dishonesty, which is not lightly assumed.   The Judge appears to have accepted that the work claimed was in fact done, while concluding that some of it was not properly chargeable to Mr Boon Hong.

[14]     I am told that Mr Boon Hong eventually did move to strike out the Mas claim against him, successfully.  The Mas did not in the end resist and he was paid costs on an indemnity basis.  He told me that he and counsel between them charged $10,000 plus disbursements, based on an hourly rate of $200.  In the present application, of course, a hearing was held.   That strike-out application cannot have been in all respects identical to this one, but it does suggest that costs in excess of $10,000 plus disbursements should not be considered unreasonable.

[15]     Mr Boon Hong’s second ground was that the Judge failed to take into account relevant information, notably the simplicity of the issue being adjudicated upon and the limited documentation that the Court must consider.  I reject these submissions. The Judge expressly recognised that Mr Deliu needed do no more than examine whether a counterclaim could be issued against non-party lawyers for their involvement as counsel.   The submission that the documents relevant to the interlocutory proceeding were few and simple is disingenuous.   It appears that the entire record of the dispute between Mr Boon Hong and Mr Deliu was placed before the Court.  The Agreed Bundle prepared by Mr Boon Hong for this appeal runs to two full Eastlight folders.   The Judge’s assessment that the dispute has become a vendetta is plainly correct.

[16]     Mr Boon Hong also alleged under this ground that the Court ought to have discounted  the  costs  claimed  for  the  respondents’  withdrawn  application  for reference of the Court’s decision to the New Zealand Law Society to see if an inquiry was necessary.  That plea was included in the original applications to strike out but by November it had been withdrawn.   I do not see why it added in any material way to costs.  It was as Mr Deliu submits simply a prayer for relief.

[17]     Mr Boon Hong next claimed that the Judge failed to take into account the “fact” that the respondents were employees of Mr Deliu.  That the Judge did refuse to take this into account is correct;   she noted there was no evidence of it.   That remains the case on appeal.  In a minute of 2 August 2011 Ellis J refused leave to file an affidavit containing evidence to that effect.  Nor is it necessarily the case that their status as employees would alter the appropriate award of costs;  they were sued in a personal capacity, and Mr Deliu appeared for them.  Similarly, there is no evidence to support an allegation by Mr Boon Hong that the instructing solicitor for the respondents was acting in a purely formal capacity.

[18]     Finally under this ground of appeal, Mr Boon Hong alleges that the Judge failed to take into account relevant facts which he had submitted and which were not rebutted by the respondents.  As Mr Deliu submits, it is difficult to understand what it was meant by this submission.   The Judge was not required to accept points advanced by Mr Boon Hong in the absence of some specific rebuttal.

[19]     The  third  ground  of  appeal  is  that  there  was  a  miscarriage  of  justice. Mr Boon Hong alleges that his own “objective costs analysis” would produce an award of no more than $2,541 inclusive of GST on an indemnity basis.  The Judge wrongly found that Mr Boon Hong’s attempt to seek costs was nothing more than a personal  vendetta,  and  the  Judge  was  wrong  to  find  that  Mr  Boon  Hong  had regularly appeared in court;  he acted only as an active instructing solicitor.

[20]     I am unable to see that Mr Boon Hong’s own assessment of the reasonable costs payable advances matters at all.   It is entirely self-serving.   So far as the observation  that  he  ought  to  know  better  is  concerned,  I  accept  Mr  Deliu’s submission that the finding was made in the 20 December 2010 judgment which is not the subject of the appeal.   In any event, Mr Boon Hong ought to have known better whether or not he practised regularly in the courts, and he was given ample opportunity to withdraw his misconceived counterclaim or consent to the strike-out application.

[21]     Nothing more need be said about the remaining ancillary grounds of appeal. Standing back, I am unable to see that the award is wrong.   All of the criticisms

made by Mr Boon Hong, to the extent that they have merit, are addressed in the round by the deduction of 50 per cent of the costs claimed.  The result is an award that appears to me appropriate having regard to the nature of the application and the manner in which Mr Boon Hong conducted himself.  The appeal is dismissed.

[22]     The cross-appeal was abandoned during the hearing, and I need say no more about it.

[23]     Having succeeded overall, the respondents will have costs of the appeal (but not the cross-appeal) on a 2B basis with disbursements as fixed by the Registrar (such disbursements to exclude those of the cross-appeal).

Miller J

Solicitors:

B G Hong Law Firm, Auckland for Appellant

Amicus Barristers’ Chambers, Auckland for Respondents