Jin v Konishi
[2015] NZHC 2417
•5 October 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-1283 [2015] NZHC 2417
UNDER the Declaratory Judgment Act 1908 BETWEEN
RUJING JIN Appellant
AND
YASUKI KONISHI AND MAKIKO KONISHI
Respondents
Hearing: 1 October 2015 Appearances:
Y Lee for the Appellant
D B Hickson for the RespondentsJudgment:
5 October 2015
JUDGMENT OF WOODHOUSE J
This judgment was delivered by me on 5 October 2015 at 10:00 a.m. pursuant to r 11.5 of the High Court Rules 1985.
Registrar/Deputy Registrar
……………………………………
Solicitors:
Mr Y Lee, Solicitor, Auckland
Mr D B Hickson, Solicitor, Auckland
JIN v KONISHI [2015] NZHC 2417 [5 October 2015]
Introduction and conclusion in essence
[1] This is an appeal against two costs decisions in a civil proceeding in the District Court.1 Both decisions were made on 24 April 2015. The appellant, Ms Jin, was the defendant in the proceeding brought in the District Court by the respondents, Mr and Mrs Konishi.
[2] The costs decisions were made at the conclusion of a long drawn out proceeding, following a hearing on 10 February 2015, nominally for formal proof against Ms Jin. No judgment by way of substantive relief was entered against Ms Jin. I will explain the circumstances in due course.
[3] One of the decisions was on applications for costs of the entire proceeding made both by Ms Jin and by Mr and Mrs Konishi. I will refer to this as “proceeding costs”. Ms Jin’s application was dismissed on the grounds that her defence had been struck out in April 2013. The application by Mr and Mrs Konishi, which was for indemnity costs, was also dismissed. The essence of the reason for their claim being dismissed was, in the Judge’s words, that they had been “the authors of their own misfortune” since May 2011, which was only three months after the claim was commenced.
[4] The second costs decision was an order that Ms Jin pay indemnity costs in a sum of $13,641.75 in respect of an application brought by her in October 2013 to set aside the striking out decision (the indemnity costs decision). Judge Sharp had originally made an order against Ms Jin’s counsel, Mr Lee, but that was set aside on appeal to this Court.2 The High Court referred the matter back to the District Court. Judge Sharp made an order that Ms Jin pay indemnity costs in the same sum that had been awarded against Mr Lee and for the same reasons.
[5] I have concluded that the appeal should be allowed: the award of indemnity costs should be set aside and no alternative order made, and on the proceeding costs
application there should be a modest allowance of costs to the appellant.
1 Konishi v Jin [2015] NZDC 6954; Konishi v Jin [2015] NZDC 6988.
2 Jin v Konishi [2014] NZHC 1150.
[6] The essence of my reasons is that, from the outset, there was no claim by Mr and Mrs Konishi with any merit, but this was offset by defaults by Ms Jin in complying with timetable directions followed by unless orders which led, in the end, to her defence being struck out.
Background
[7] For a summary of the claims originally made by Mr and Mrs Konishi, and most of the relevant procedural history, I gratefully adopt the summary in a judgment of Gilbert J in the earlier appeal.3 This summary also includes some conclusions with which I respectfully agree. He said:
[6] The respondents, Mr and Mrs Konishi, entered into an agreement in July 2010, to purchase a new house in Auckland from the first appellant, Ms Jin. The agreement was in the form approved by the Auckland District Law Society (Eighth Edition). Mr and Mrs Konishi paid a deposit of $30,000 which is held by the real estate agent as stakeholder. The balance of the purchase price was to be paid on settlement, following issue of a new title.
[7] The agreement contained a term requiring Ms Jin to remedy any defects or other faults notified by Mr and Mrs Konishi during the maintenance period, being 90 days from settlement.
[8] The agreement did not settle. In January 2011, Mr and Mrs Konishi purported to avoid the agreement on the basis that Ms Jin had not complied with her obligations under the maintenance clause. They relied on cl 8.7(5) of the standard terms and conditions of the agreement which enables either party to cancel an agreement which is subject to a condition that is not fulfilled or waived prior to due date. This clause has no application in the present case because the maintenance covenant is not a condition covered by cl 8.
[9] Mr and Mrs Konishi filed a notice of claim against Ms Jin in the District Court at North Shore in February 2011 seeking a declaration that they had validly avoided the agreement relying on cl 8.7(5). They sought an order for return of their deposit with interest. They also sought $5,214.38 being the rent they had paid on the property they were living in and further rent from the date of issue of proceedings to the date of judgment at the rate of $2,607.14 per month. No basis for the rent claim was identified.
[10] A new title to the property issued on 28 March 2011. Notice of this was given to Mr and Mrs Konishi’s solicitors on 11 April 2011. They responded by requisitioning the removal of the cross-lease instruments and associated memorials on the basis that the agreement was for a freehold title. Ms Jin did not comply with this requisition and accordingly, on 21 April
2011, Mr and Mrs Konishi’s solicitors cancelled the agreement pursuant to cl
5.2(3)(c).
3 Jin v Konishi, above n 2, at [6]-[16].
[11] Ms Jin accepts that this cancellation was effective and does not oppose the return of the deposit. Mr and Mrs Konishi recognise that they have no entitlement to rent and they have abandoned this part of their claim. The result is that all parties agree that the real estate agent should refund the deposit, with interest. However, this has not yet happened because the parties are locked in battle over the issue of costs. This is the only issue that divides them and that has been the case for over two years.
[12] In summary, this is a straightforward case involving a very modest sum. In the normal course, one would expect a dispute of this nature to be resolved promptly and efficiently. The opposite has occurred in this case. Despite there being no dispute that Mr and Mrs Konishi are entitled to the return of their deposit, but not rent, the proceedings have an extraordinary history.
[13] In August 2012, Ms Jin sought judicial review of six procedural orders made by various judges in the District Court. That application was dismissed by Wylie J on 19 February 2013. His Honour subsequently ordered Ms Jin to pay indemnity costs for those proceedings.
[14] On 30 April 2013, Judge M-E Sharp struck out Ms Jin’s defence
because of non-compliance with ‘unless’ orders made on 14 August and 19
December 2012.
[15] On 10 October 2013, the Court of Appeal dismissed Ms Jin’s appeal against Wylie J’s two judgments and ordered Ms Jin to pay indemnity costs on the appeal. The Supreme Court dismissed Ms Jin’s application for leave to appeal against this judgment.
[16] On 31 October 2013, after the Court of Appeal had released its
decision, Ms Jin applied to set aside Judge Sharp’s orders made on 30 April
2013 debarring her from defending the proceeding. That application was plainly misconceived and Judge Sharp dismissed it in a judgment delivered on 9 December 2013. The Judge made an order requiring Mr Lee personally to pay indemnity costs on the application. It is from this judgment that the appellants now appeal.
[8] The appellants just referred to in that judgment were Mr Lee and Ms Jin. Ms Jin did not appear at the hearing and her appeal was accordingly dismissed for want of prosecution.
[9] Gilbert J concluded that the District Court had no jurisdiction to make the costs order against Mr Lee. His appeal was accordingly allowed and the costs order against him was quashed. The issue of party and party costs was referred back to the District Court for determination. Costs on the appeal were to lie where they fell.
[10] The next event of consequence was the formal proof hearing in the District Court, or at least the conclusion of it, on 10 February 2015, followed by the two judgments delivered on 24 April 2015.
[11] Some additional background facts need to be recorded on two topics noted by Gilbert J: (1) the approach taken by Ms Jin in relation to repayment of the deposit; and (2) the nature of substantive relief sought by Mr and Mrs Konishi in successive amendments of their notice of claim.
[12] Gilbert J noted that Ms Jin accepted that cancellation of the agreement by Mr and Mrs Konishi was effective, compared with the earlier purported avoidance of the agreement, and that she did not oppose return of the deposit. He did not mention when Ms Jin first took this position, and the evidence may not have been before him. The evidence now available makes clear that that was Ms Jin’s position more or less from the outset.
[13] Mr and Mrs Konishi cancelled the agreement on 21 April 2011. On 11 May
2011 Ms Jin advised her real estate agent that she was willing to have the deposit refunded to Mr and Mrs Konishi provided the agent did not seek commission. The agent confirmed that it would not seek commission on 13 May 2011. One of the problems in this case seems to have been an absence of clear communication between the lawyers on both sides focused on the essential issues, rather than peripheral or irrelevant matters. Nevertheless, Judge Sharp, in her substantive formal proof judgment, which did not result in any decision against Ms Jin, reached a conclusion as follows:
[52] There were times when the defendant [Ms Jin] vehemently denied the plaintiffs were entitled to refund of the deposit and others when she did her best to facilitate a refund of the plaintiffs’ deposit but given that Barfoot and Thompson Limited were nonetheless prepared to refund it, the fact that this did not happen until December 2014 cannot be laid at the feet of the defendant. Since 13 May 2011 the plaintiffs have been the authors of their own misfortune in not having their deposit returned.
(emphasis added)
[14] There has been no cross-appeal by Mr and Mrs Konishi. Judge Sharp’s
conclusion is binding on them.
[15] The Judge, in that passage, referred to Ms Jin taking contrary positions from time to time. However, what seems to underlie that is the fact that Ms Jin was always willing to confirm that the deposit should be repaid to Mr and Mrs Konishi provided Ms Jin did not continue to face other claims, and being claims that in the end were held to be untenable. This was not only the untenable claim for rent but a claim for indemnity costs. It is remarkable that the first claim filed, in February
2011 and founded on the unsustainable proposition that the agreement had validly been avoided, included a claim for indemnity costs. In my judgment it is clear that a claim was maintained against Ms Jin, from the outset, almost entirely for the purpose of seeking to recover costs from her when there was no substantive claim available against her and therefore no basis on which costs could be recovered.
[16] There is another important fact relating to Ms Jin’s position, whatever position may have been taken on her behalf in the courtroom battle. There was a Calderbank letter from Mr Lee on behalf of Ms Jin to Mr Hickson on behalf of Mr and Mrs Konishi, and dated 9 December 2011. The relevant part of that letter is as
follows:
On a without admission of liability basis my client consents to refund the
$30,000 to your client and treat the acceptance of the offer as full and final settlement of the dispute.
It would satisfy 3E1 of your client’s amended claim. I submit that there is no provision in the sale and purchase agreement to claim compensation from rental per 3E2 …
In the spirit of reaching an amicable resolution $30,000 would be refunded by consent.
If your client accepts the offer of full refund of the deposit, the only outstanding issue will be their rental claim for $15,642.84 which is below the $20,000 limit for resolution at the Small Claims Tribunal. My client is willing to have the rental claim resolved at the Small Claims Tribunal …
I believe the issues can be resolved without having to take up the Court’s
valuable time and resources.
[17]
As is apparent from the preceding narrative that offer was not accepted.
It
should have been.
[18] The amendment of Mr and Mrs Konishi’s claims is the other matter to be noted. After Ms Jin’s defence was struck out, in the decision of 30 April 2013, Mr and Mrs Konishi filed their second amended claim. Leave to do so had been granted in the 30 April decision. The first amended claim, dated 1 December 2011, eight days before the Calderbank letter from Mr Lee on behalf of Ms Jin, continued to seek a declaration that the agreement for sale and purchase had “either been lawfully avoided or cancelled and that all moneys paid to the defendant pursuant to the agreement, together with interest earned on those moneys, be refunded”. No money had been paid to the defendant. The claim for rent was maintained, together with a claim for indemnity costs. In the second amended claim the principal relief sought continued to be a declaration of lawful avoidance or cancellation, but here coupled with a declaration that the deposit paid to the stakeholder, Barfoot & Thompson Ltd, together with interest, be refunded. Barfoot & Thompson was not a party to the claim. There was still a claim directly against Ms Jin for $30,000 and interest and indemnity costs. It may be noted that the deposit had been paid to Barfoot & Thompson on 19 July 2010 and interest was sought from Ms Jin from that date.
[19] The formal proof was sought on a third amended notice of claim dated 19
August 2013. In this claim there was no longer a claim against Ms Jin for the
$30,000, and interest. The only claim was for indemnity costs.
The District Court judgment on proceeding costs4
[20] A substantial part of the judgment is directed to the fact that the substantive relief sought by Mr and Mrs Konishi was a declaration. The Judge considered various authorities and held that the relief sought was not available in the circumstances of the case before her.5
[21] The Judge then turned to the applications by both parties for proceeding costs. It was for the purpose of considering those applications that the Judge reviewed the underlying merit of Mr and Mrs Konishi’s claims, and their conduct of
the litigation, and came to the conclusion earlier recorded – “Since 13 May 2011 the
4 Konishi v Jin [2015] NZDC 6954.
5 Konishi v Jin [2015] NZDC 6954 at [13]-[43].
plaintiffs have been the authors of their own misfortune in not having their deposit returned”.
[22] The Judge dismissed Ms Jin’s application for costs on the grounds that she had earlier been debarred from defending the claim. The Judge concluded that Ms Jin did have standing to appear on the formal proof hearing “to mitigate damages”. She was not entitled to make a cross-application for costs. Her application for costs was accordingly dismissed.
[23] On the costs application of Mr and Mrs Konishi the Judge said:
[55] Because of the manner in which the plaintiffs’ claim is pleaded (the primary relief sought being a Declaration which this Court has jurisdiction to grant only as ancillary relief), costs is not a special head of damage to be proved. Rather, the Court must consider whether to exercise its discretion to award costs consequent upon the partial settlement between the parties. This is not a case where I am prepared to do so. The defendant became unable to cross-apply for costs when her defence was struck out. Costs will lie where they fall except in regard to the defendant’s application to set aside my order debarring the defendant from defending, which is the subject of a separate judgment.
The indemnity costs judgment
[24] The Judge noted the judgment of Gilbert J setting aside her costs judgment against Mr Lee with the direction that costs be reconsidered by the District Court. She identified two issues: (1) should the unsuccessful defendant (Ms Jin) pay costs to the plaintiffs; and (2) in what amount?
[25] She concluded as follows:
[3] In my previous judgment I found that the defendant acted:
[38] … vexatiously, frivolously, improperly and unnecessarily in bringing this application to set aside the judgment of 30 April 2013. Her conduct meets all the qualifying criteria for an award of indemnity costs in circumstances where having already had her defence struck out, she waited six months and then attempted not just to have her defence reinstated but (on spurious grounds) set aside the order striking it out in the first place. In doing so, she presents no new argument; no new evidence that is admissible and does not seek to excuse her delay in making the application.
[39] It was misconceived for more than just those reasons. In addition it was founded on improper grounds; it was argued that the judgment of 30 April 2013 constituted a default judgment which was susceptible to being set aside when in fact it was not. It was argued that it was a judgment irregularly obtained. This was patently absurd particularly when the defendant was represented at the hearing and submissions were heard after which the orders were made.
[40] Furthermore the proof of the pudding can really be seen in the efforts that Mr Lee went to today to argue why the application should be granted. That was really to force the Court to examine the merits of the claim, merits of a claim which has not yet been heard by the Court because the form proof has not been able to be held. If it could have been proved to the Court that the defendant had not failed to comply with the unless orders which caused the strike out, then notwithstanding the great delay – which was unexplained – the Court may have listened. But, to belligerently (as the defendant through Mr Lee did) continue to berate the Court about matters which are irrelevant to the one issue that should have been argued and instead try to convince the Court that the claim had no merit, was only grist to the mill.
[41] I agree with Mr Hickson. It would be difficult to conceive a stronger claim for indemnity costs on this application than exists in this case.
[4] I do not resile from those statements. I still consider that an award for indemnity costs was justified. However in light of the High Court’s determination, indemnity costs are now awarded against the defendant in the sum of $13,641.75 which I found then to be reasonable. I have seen nothing since that would cause me to feel differently. This award is to be paid by the defendant to the plaintiffs within 14 days of the release of this judgment.
Evaluation
[26] The appeal, in respect of both costs orders, is an appeal against exercise of a discretion. The appellant must therefore establish that there was an error of principle, the Judge failed to take into account relevant circumstances, the Judge took into account irrelevant circumstances, or the decision was plainly wrong.6 I am satisfied, with respect, there was relevant error by the Judge.
[27] The Judge, in her conclusion on indemnity costs, said in effect that nothing had occurred since the decision against Mr Lee which altered matters. In my opinion that is not correct. When the matter was before the Court in December 2013,
resulting in the order against Mr Lee, it seems that there was very little before the
6 May v May (1982) 1 NZFLR 165 (CA) at 170.
Court bearing on the underlying merit of the plaintiffs’ claim, or on the conduct of the plaintiffs in their continued pursuit of Ms Jin and the reasons for it. The lack of information in that regard may have been contributed to by some of the ways in which Mr Lee conducted the litigation on behalf of Ms Jin, but at least a clear sense of the unsatisfactory approach of Mr and Mrs Konishi was conveyed to Gilbert J in the hearing before him. In any event, by April 2015 the position had been made quite clear to the Judge as her conclusion demonstrates.
[28] The substance of this is that there had been no merit in the litigation pursued by Mr and Mrs Konishi against Ms Jin since May 2011. Any uncertainty that that is the substance of the case is removed by the other matters I referred to earlier. The Calderbank offer in December 2011 is quite clear. The Judge did not refer to the Calderbank offer in either of her costs judgments. If it had been put in evidence, there was error in not taking it into account. But it seems more likely that it was not drawn to the Judge’s attention, or it was lost sight of in the course of the formal proof hearing which plainly involved a wide range of submissions by counsel for both parties.
[29] Some observations of the Judge indicate her assessment that there was a degree of fault on the part of Ms Jin or her counsel. For example:
[50] … Had the plaintiffs not insisted the defendant pay their full solicitor/client costs after cancellation, the deposit would have been refunded to them some years ago. Equally however, the defendant changed her position on refund like a chameleon, over the years. The defendant would agree to a refund, then shortly thereafter change her mind. …
[30] But the Judge then continued:
… It is undeniable that the defendant’s solicitor’s behaviour on the issue of the refund must have been confusing, irritating and difficult for the plaintiffs’ counsel to follow. But at the heart of it was always the plaintiffs’ insistence on having their full solicitor/client costs met by the defendant. Had the plaintiffs, early on, agreed to accept a refund of their deposit from the stakeholder whilst reserving costs for the Court to determine, many years of litigation expense stress could have been avoided. That did not happen. The conduct of the lawyers for the parties has caused a calamitous state of affairs where huge costs must have been incurred by both parties.
[51] Both lawyers have protracted and extenuated this litigation needlessly; there have been faults on both sides. There was nothing to
prevent the plaintiffs from accepting a refund of their deposit from the stakeholder and seeking costs from the defendant via the litigation that was already in progress.
(original emphasis)
[31] The concluding paragraph, [52], to which I have given emphasis, then followed; that is, the paragraph which concludes that the plaintiffs have been the authors of their own misfortune for almost the entire four year history of this litigation.
[32] In respect of the indemnity costs order I am satisfied that there was error in not weighing the conduct of Ms Jin (direct or indirect through Mr Lee), which was taken into account in the decision made in December 2013, against the conduct of Mr and Mrs Konishi (direct or indirect through Mr Hickson), which was plainly considered in April 2015 to have been unacceptable.
[33] In December 2013 the Judge concluded that Ms Jin had acted “vexatiously, frivolously, improperly and unnecessarily” in bringing the application to set aside the strike out judgment. As I said to Mr Lee, this appeal against costs is not an occasion to review the merit of that conclusion, and it stands. But it was a conclusion directed to what Gilbert J described as a “misconceived” interlocutory application. In my judgment it pales into insignificance when weighed against the plaintiffs’ conduct in the claims they made against Ms Jin, the way in which they pursued those claims and the fact that those claims were pursued for almost the entire duration of the proceeding for the ulterior and improper purpose of obtaining indemnity costs in respect of non-existent claims.
[34] There are added considerations. Ms Jin’s defaults in respect of two unless orders warranted an appropriate response from the Court. Nevertheless, and without in any way revisiting the merit of the strike out decision made at the time, as it turns out what Ms Jin failed to provide to the Court, in relation to her defence, was not in substance necessary. In April 2015 the Judge was able to reach a conclusion, without the documents required from the defendant, that the plaintiffs had no viable claim.
[35] For all of these reasons, I am satisfied that the Judge was in error in ordering
Ms Jin to pay the indemnity costs and that that order should be set aside.
[36] There remains the appeal by Ms Jin against the refusal of costs in her favour. Mr Lee advanced a range of arguments in support of his submission that Ms Jin is entitled to costs notwithstanding the fact that an order was made preventing her from continuing her defence. Mr Lee’s submissions were founded on a range of principles, as well as arguments directed to the merit of the decision to strike out Ms Jin’s defence and the merit of the decision refusing Ms Jin’s application to set aside that order.
[37] The arguments going to the merits of the strike out order and the order refusing to set aside that decision cannot assist Ms Jin. Those orders are binding. It was not open to Ms Jin, through Mr Lee, to seek to have this Court review those decisions on an appeal against completely different decisions. In the course of discussions with me I understood that Mr Lee accepted the position.
[38] The various principles referred to by Mr Lee, in support of the argument that Ms Jin is entitled to proceeding costs, are important ones, such as the right to be heard. But the importance of the particular rights, or principles, referred to by Mr Lee are not absolute. In litigation, parties also have particular obligations, and these often are the means of securing rights of the party on the other side. The nature of the breach of particular obligations by a party may reach a point where the rights of that party become subservient. The unchallenged decision of Judge Sharp to strike out the defence is an instance of this. Had Ms Jin complied with very clear directions of the Court, being the directions in the unless orders, it is highly likely that, at this point, Ms Jin would be entitled to recover proceeding costs from Mr and Mrs Konishi. She has lost that right, as Judge Sharp held.
[39] I am nevertheless satisfied that Ms Jin is entitled to a modest award of costs in respect of the formal proof hearing. She was entitled to be heard on the question whether she should pay indemnity costs to Mr and Mrs Konishi in respect of the December 2013 hearing. She was also entitled to be heard on the application against her for proceeding costs, which was also an application for indemnity costs. Ms Jin
succeeded in the District Court in resisting the latter and has succeeded in this Court on the question of indemnity costs. I am satisfied she is entitled to costs in the District Court to that extent. Given the history of this proceeding I have concluded that I should make a pragmatic assessment as to the quantum of those District Court costs, rather than prolong the proceeding to have the quantum sorted out in some other way. The costs award in favour of Ms Jin, against Mr and Mrs Konishi, is
$6,000.00. This is for the hearing over two days and is inclusive of all disbursements and GST.
[40] I am also satisfied that Ms Jin is entitled to costs on this appeal which I fix in a sum of $5,000.00 (inclusive of disbursements and GST).
[41] The costs awards are to be paid by set off against costs owed by Ms Jin to Mr and Mrs Konishi made on other hearings, including appeals other than that heard by Gilbert J.
Result
[42] On the appeal against the indemnity costs order in Konishi v Jin [2015] NZDC 6988: the order is quashed and the application of the plaintiffs in the District Court for indemnity costs is dismissed.
[43] On the appeal against the costs decisions in Konishi v Jin [2015] NZDC
6954:
(a) The order dismissing the application by the defendant in the District
Court, Ms Jin, is set aside.
(b)There is an order that the plaintiffs in the District Court pay costs to the defendant in a sum of $6,000.00 inclusive of all disbursements and GST.
(c) Those costs are to be paid by set off against costs payable by Ms Jin to Mr and Mrs Konishi on outstanding orders for costs against Ms Jin in their favour.
(d) The District Court decision is otherwise affirmed.
[44] On this appeal the respondents are to pay the appellant costs, inclusive of disbursements and GST, in a sum of $5,000.00, with this sum also to be paid by set
off in the manner recorded above.
Woodhouse J
4