Hou v Zhang

[2024] NZHC 2434

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-2290

[2024] NZHC 2434

BETWEEN

ZHENCHANG HOU

Plaintiff

AND

KAI ZHANG

First Defendant

TAMAKI CA LIMITED

Second Defendant

Hearing:

On the papers

Appearances:

M Taylor for Plaintiff

M Pang and X Lin for Defendants

Judgment:

28 August 2024

COSTS JUDGMENT OF MOORE J

This judgment was delivered by me on 28 August 2024 at 3.00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date: …………………………..

Solicitors:

Integritas Law Firm, Auckland Maria Taylor, Auckland

HOU v ZHANG [2024] NZHC 2434 [28 August 2024]

Introduction

[1]    This judgment deals with an outstanding question of costs arising out of proceedings brought by the plaintiff, Mr Hou, for the enforcement of an earlier order for specific performance made by this Court in November 2023. The application came before me on 29 May 2024 and culminated in orders being made by consent.

Background

[2]    The background to this matter is set out in my minute of 29 May 2024.1 In brief, the plaintiff, Mr Hou, and the first defendant, Mr Zhang, executed an agreement between them to purchase and develop a property. The property is held by the second defendant, Tamaki CA Ltd. Mr Zhang and his wife are its directors and shareholders.

[3]    The plan was to demolish the property’s existing dwelling and to construct townhouses. Mr Hou contributed $1.1 million to the endeavour while Mr Zhang contributed $50,000.

[4]    Mr Hou ultimately became dissatisfied with the arrangements and progress of the development. He gave notice under their agreement that he wished to sell. This triggered a procedure in their agreement which required the parties to buy each other out.

[5]    The buyout notice remained extant. Neither party exercised this option and, accordingly, Mr Hou brought proceedings for specific performance of the agreement’s sale to third parties provision. Associate Judge Sussock granted those orders subject to the parties instructing an independent solicitor for the conveyance of the property, and on condition that the proceeds of sale be paid into and held in the trust account of that independent solicitor.2

[6]    Following Associate Judge Sussock’s judgment, the parties agreed in December 2023 that:

1      Hou v Zhang HC Auckland CIV-2024-404-2290, 29 May 2024 (Minute of Moore J).

2      Hou v Zhang [2023] NZHC 3102 at [80].

(a)Ms Sun of Elite Legal would act on the conveyance of the property;

(b)the property was to be sold by auction in February 2024;

(c)Kitty Long of Barfoot & Thompson would be appointed real estate agent; and

(d)the property would be sold at a reserve price of $1.2 million.

[7]    Despite that agreement, glacial progress was made with selling the property. The agency agreement with Barfoot & Thompson went unsigned and no steps were taken to progress the sale.

[8]    As a consequence, on 12 March 2024, Mr Hou applied for relief in this Court to enforce Associate Judge Sussock’s orders, and for relief for contempt of court against the defendants. Mr Hou further refined the relief he sought in an amended application dated 27 March 2024. The defendants opposed but primarily out of opposition to Mr Hou’s application for contempt orders and associated costs.

[9]    Johnstone J directed the application to be set down for two hearings, one to determine the next steps in relation to the sale of the property and another to deal with the issue of contempt.

[10]   It was the former hearing which came before me on 29 May 2024. As indicated, it ultimately ended in settlement. Counsel for both parties conferred, and I made orders by consent:

(a)directing that the property would be sold at auction for a reserve price of $1.2 million;

(b)appointing Elite Legal to act as the independent solicitor for the conveyancing;

(c)directing the defendants to do all things and take all steps necessary to appoint Ms Long as real estate agent;

(d)directing the defendants to provide keys and or access to the property to Ms Long and Barfoots & Thompson as necessary and required;

(e)directing that there would be no requirement that the parties be present at any viewing of the property by the agent or prospective purchasers;

(f)directing that the auction occur as soon as practicable and in accordance with Ms Long’s recommendations; and

(g)that the parties would consider Ms Long’s recommendations as to any maintenance works on the property but, unless otherwise agreed, would sell the property “as is”.

The question of costs

[11]   Mr Taylor, for Mr Hou, indicated at the hearing before me that he would seek indemnity costs for his client, notwithstanding the consent orders put in place. He now confirms that position, essentially on the basis that Mr Hou’s application ought not to have been necessary.

[12]   Mr Taylor emphasises that the defendants opposed Mr Hou’s  amended application despite advising the Court, through their counsel, that they agreed to the property being sold forthwith. Furthermore, it was only at the hearing of Mr Hou’s amended application that the defendants conceded and agreed to the orders sought. In such circumstances, Mr Taylor submits that his client was put to unnecessary costs in bringing the application and is entitled to indemnity costs. He advises that indemnity costs of $15,500 (which is exclusive of GST) plus disbursements are sought.

[13]   Mr Pang, for Mr Zhang, resists any such award of costs. He emphasises that Mr Hou’s amended application was for orders:

aAllowing the applicant to take all steps necessary to conduct the sale of the  Property  pursuant  to  the  judgment  of  Sussock  AJ  dated  6 November 2023 without consultation with or reference to the respondents, and where required to execute and sign such documentation as is necessary to implement the sale of the Property and/or for the appointment of an irrevocable power of attorney in favour of the applicant to conduct the sale of the Property on behalf

of the first and/or second respondents (and/or for other orders as deemed necessary).

In the alternative:

bRequiring the first defendant, Kai Zhang (Mr Zhang), and/or the second defendant, Tamaki CA Limited (TCA), to take all necessary steps with reasonable diligence to facilitate the sale of the Property by 30 April 2024 (or as soon as practicable thereafter), on the terms agreed between the parties including, to:

iProvide access to the Property;

iiMeet with the agreed sales agent (Kitty Long at Barfoot & Thompson) to discuss the marketing and sales process;

iiiSign any documentation as required, including a listing authority, auction documents and sale and purchase agreement.

[14]   As a result, Mr Pang says that this Court’s starting point should be that costs should lie where they fall, given the first form of relief (paragraph a) was all but abandoned by Mr Hou at the hearing and the consent orders given were significantly different from the second form of relief (paragraph b) sought. The implication of his submission is that in agreeing to consent orders, it is unclear which party would have been successful had the matter gone to conclusion. He says however that it is the defendants who are entitled to costs – and indeed, increased costs – because the consent orders reflected what the parties had already agreed to, save for a provision suggested by the defendants that the parties would consider the real estate agent’s recommendations but, unless otherwise agreed, would sell the property “as is”. On that basis, Mr Pang says that the defendants are entitled to increased costs (uplifted by

25 per cent on a 2B basis) for all the steps that followed Mr Hou’s amended application.

[15]   As Mr Taylor rightly submits, Mr Hou’s application ought not to have been necessary. Associate Judge Sussock made orders for specific performance and the parties were, back in December 2023, well on track to fulfil those orders and sell the property at the heart of their substantive dispute. The application was necessary because:

(a)the agency agreement to engage the real estate agent went unsigned despite agreement in December 2023 to this course, and only the defendants, as the proprietors of the property, could execute it;

(b)the defendants were evidently delaying progressing with the sale of the property, despite their in-principle agreement in December 2023;

(c)the defendants insisted that a representative of Mr Hou be present on site at all times that the property was to be accessed by the real estate agent, and did so without any reasonable foundation; and

(d)the defendants insisted that Mr Hou tnot oppose or object to advice and recommendations given by the real estate agent in relation to selling the property.

[16]   The consent orders that I made effectively addressed those concerns. The fact that Mr Hou was successful as a consequence of orders made by consent rather than a judgment of this Court does not obscure the fact that he was ultimately successful in bringing his application. As such, I consider it plain that he is entitled to costs.

[17]   Mr Pang’s submissions are, with respect, without foundation. If the defendants agreed to taking all necessary steps to sell the property as Mr Hou sought, they should not have opposed the application and put themselves and Mr Hou to the cost of a hearing. The relief obtained by the consent orders was necessary precisely because they had not yet undertaken to act in the way Mr Pang says they agreed to.

[18]   Furthermore, the present case was not one where it was unclear who would have won had the parties not ultimately settled, as Mr Pang’s submissions imply. As I said to Mr Pang at the hearing of this application, I could see no basis for inferring an implied term in the sale clause that the parties were required to accept the recommendations of a real estate agent as to how the property might best be presented in order to facilitate a sale, which was the major source of contention between the parties. It is obvious who would have won had the parties taken this matter to

conclusion. As such, costs can be awarded on ordinary principles.3 The starting point is not, as Mr Pang contends, that costs should lie where they fall.

[19]   Even so, I reject Mr Pang’s submission that the defendants are entitled to costs because, in agreeing to an order that the parties would consider any recommendations of the real estate agent as to maintenance works, it is they who were ultimately successful. As far as I apprehended the position, Mr Hou always agreed to this. And in any event, the obligation is only one to consider; not to compel, as Mr Pang tried to argue before me.

[20]   Ultimately, costs lie at the discretion of the Court, albeit guided by the general principles contained in the High Court Rules 2016.

[21]   Rule 14.6(4)(a) provides that the Court may order a party to pay indemnity costs if a party has acted unnecessarily in defending a proceeding. That is what the defendants have done here. This matter should have ended with Associate Judge Sussock’s decision in November 2023. It certainly should not have continued after the parties came before Johnstone J and Mr Pang advised the Court that the defendants wished for the property to be sold but would oppose the application with the knowledge that Mr Hou would seek indemnity costs if they did so. The defendant’s opposition to a course which Mr Pang now says they ultimately agreed to was unreasonable.

[22]   I consider Mr Hou to be plainly entitled to indemnity costs in these circumstances.

Result

[23]   Mr Taylor’s memorandum as to costs seeks indemnity costs of $15,500, a sum which excludes GST, and which I observe is less than that which Mr Hou has actually been invoiced in relation to this matter.

3      Lendrum v Northern Presbytery [2020] NZHC 325 at [32].

[24]   Accordingly, I order that Mr Hou is entitled to indemnity costs in the amount of $15,500 together with disbursements of $677.77.

Moore J