Kung v Fitton

[2017] NZHC 670

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-1358 [2017] NZHC 670

UNDER	the District Courts Act 1947
BETWEEN	ALLAN KUNG Appellant
AND	DAVID ARTHUR FITTON Respondent

Hearing:	(On the papers)
Counsel:	G J Thwaite for Appellant D W Grove for Respondent
Judgment:	7 April 2017

JUDGMENT OF BREWER J

This judgment was delivered by me on 7 April 2017 at 2:30 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Gregory J Thwaite (Auckland) for Appellant

Foy & Halse (Auckland) for Respondent

KUNG v FITTON [2017] NZHC 670 [7 April 2017]

Introduction

[1]      On 21 November 2016, I heard appeals from the District Court relating to a dispute between Mr Kung and Mr Fitton.   The substantive dispute centred on the extent to which Mr Fitton was liable to Mr Kung under a deed of indemnity and guarantee for payments Mr Kung had made pursuant to his obligations under a term loan agreement and mortgage. The District Court held that a number of set-offs were available to Mr Fitton which resulted in a nil balance owing to Mr Kung.  I found the District Court judgment to be flawed but unfortunately the state of the evidence did not allow me to reach a decision as to the amount properly owing.

[2]      Accordingly,  on  21 November  2016  I  delivered  a  judgment  in  which  I allowed Mr Kung’s appeal in part but remitted the substantive matter to the District Court  for  a  determination  as  to  quantum.1      I also  quashed  the  District  Court’s decision as to costs and remitted that matter for re-determination in light of my judgment and the result of the substantive proceeding.

[3]      Mr Kung now applies to this Court for:

(a)      an order under r 20.20 of the High Court Rules that Mr Fitton pay to Mr Kung some or all of the amount of costs awarded in the District Court  and  paid  by  Mr Kung,  along  with  appropriate  interest;  or alternatively;

(b)      a  recall  of  my  judgment  and  a  judgment  issued  addressing  the

payments made pursuant to the District Court’s costs decision; and

(c)       Leave to appeal my judgment to the Court of Appeal.

[4]      Both parties have also filed costs memoranda having failed to agree costs in relation to the High Court appeal.

Should I make an order under r 20.20?

[5]      Rule 20.20 of the High Court Rules provides:

20.20   Repayment of judgment sum and interest

(1)       Subclause (2) applies when—

(a)       a party to proceedings before a decision-maker (party A) has, in accordance with a judgment or order of the decision- maker, paid an amount to another party to the proceedings (party B); and

(b)      on appeal to the court, the effect of the court’s determination

is that some or all of the amount did not need to be paid.

(2)       When this subclause applies, the court—

(a)       may order party B to repay to party A some or all of the amount paid by party A; and

(b)       may also order party B to pay to party A interest at a rate no greater  than  the  prescribed  rate  (within  the  meaning  of section 87(3) of the Judicature Act 1908) on the sum ordered to be repaid.

[6]      It appears the jurisdictional requirements of this rule are met.  Mr Kung has, in accordance with a judgment of the District Court, paid an amount to Mr Fitton, another party to the proceedings. As things currently stand, that amount did not need to be paid because I have quashed the District Court’s costs decision.

[7]      It is not improper to raise the issue at this stage of proceedings even though it was not in the notice of appeal or raised as an issue during the hearing of the appeal. In Riveroaks Farm Limited v Holland Beckett, Allan J quashed a costs order of a Tribunal  but  did  not  order the repayment  of that costs  order in  his  substantive judgment.2   In his later costs judgment, the Judge said:

[8]       Finally, there is an issue as to entitlement of the appellants to interest on the sum of $36,312.38 paid by them to the respondents on 2 July 2010 and refunded by the respondents on 28 February 2011.   The respondents point out that there was no reference to interest on this sum in the appellants’ notice of appeal; neither was it raised as an issue during the hearing of the appeal.   It  is further  argued  that because the  Court simply quashed the decision of the Tribunal without referring to interest, I must be taken to have concluded that the appellants were not entitled to any interest.  That is not a

proper  conclusion.    Questions  of  repayment  of  the  costs  of  an  interest thereon have not arisen to date and remain open for determination.   The appellants  are  not  estopped  now  from  raising  the  interest  point  simply because there was no reference to it in the notice of appeal.

[8]      Turning to the rule itself, under r 20.20(2) the Court “may” order a party to repay money to the other party.  It is clear, therefore, that the Court’s power to order payment under the rule is to be exercised at its discretion.  Rule 54 of the Court of Appeal (Civil) Rules 2005 is the equivalent of r 20.20.  Rule 54 provides:

54       Repayment of judgment sum and interest

(1)       If  an  appellant  has,  in  accordance  with  a  judgment  of  a  court appealed from, paid a judgment debt and any interest payable on that debt, and the appellant successfully appeals from that judgment, the Court may make the orders described in subclause (2).

(2)       The Court may, in its discretion, make any orders that seem just

concerning—

(a)      the repayment of the amount paid by the appellant; and

(b)       the payment of interest to the appellant on the amount paid by the appellant under the judgment during the period commencing on the date of the payment and ending with the date of the repayment.

[Emphasis added]

[9]      It is clear from the word “just” that the Court of Appeal is to exercise its discretion having regard to all relevant circumstances and looking at the matter in the round. A similar approach is proper in the High Court under r 20.20.

[10]     The complicating factor in this case is that in due course the District Court will reconsider its costs decision.   The question is whether Mr Fitton should be ordered to repay Mr Kung pending that decision.

[11]      In my view, there is no reason why Mr Fitton should continue to possess the fruits of a decision which was quashed on appeal notwithstanding the possibility that Mr Kung may, at a later date, be ordered to repay all or some of that amount.

[12]      Turning to the question of interest, in Deloitte Touche Tohmatsu Trustee Co

Ltd v Christchurch Pavilion Partnership (No 1) the Court of Appeal held that the

object of an equivalent rule in an earlier iteration of the Court of Appeal (Civil) Rules was to restore the appellant to the position it would have occupied had the appellate outcome been adopted from the beginning.3     For that reason, the Court ordered payment of the interest earned on the judgment sum.

[13]      Accordingly,  I make an order that Mr Fitton is to repay to Mr Kung the amount of $29,062.50 being the amount Mr Kung paid pursuant to the costs decision of the District Court.  Interest is to be paid on that figure at five per cent, calculated from the date of payment by Mr Kung.

[14]      Mr Kung’s application to recall my judgment necessarily falls away.

Costs for High Court decision

[15]     Mr Thwaite submits that Mr Kung is entitled to costs as the successful party because my judgment of 21 November 2016 had the effect of allowing his appeal and quashing the costs order made against him.  I do not agree.  I accept Mr Grove’s submission that there has been no successful party, at least at this stage.  Although Mr Kung won on the point that the Judge erred in reaching a nil balance, Mr Fitton won on establishing that the indemnity did not cover mortgage obligations incurred in  respect  of the sum  Mr Kung and  Mr Wichman  borrowed  without  Mr Fitton’s knowledge. The District Court is yet to make a final determination as to quantum.

[16]     In those circumstances, I direct that costs are to lie where they fall.

Should leave be given to appeal?

[17]     Mr Kung requires leave to appeal under s 60 of the Senior Courts Act 2016 which provides as follows:

60       Appeals against decisions of High Court on appeal from District

Court, Family Court, or Youth Court

(1)      The decision of the High Court on appeal from the District Court, the Family Court, or the Youth Court is final unless a party,  on

3      Deloitte Touche Tohmatsu Trustee Co Ltd v Christchurch Pavilion Partnership (No 1) [2002] 3

NZLR 215, (2002) 16 PRNZ 337.

application, obtains leave to appeal against the decision to the Court of Appeal.

(2)       An application under subsection (1) for leave to appeal to the Court of Appeal must be made to the High Court or, if the High Court refuses leave, to the Court of Appeal.

[18]     The principles established in relation to second appeals are well known.  In

Waller v Hider the Court of Appeal observed:4

Upon a second appeal this Court is not engaged in the general correction of error.    Its  primary  function  is  then  to  clarify  the  law  and  to  determine whether it has been properly construed and applied by the Court below.  It is not every alleged error of law that is of such importance, either generally or to the parties, as to justify further pursuit of litigation which has already been twice considered and ruled upon by a court.

[19]     In my view, Mr Thwaite has not properly identified an issue of sufficient importance to warrant further litigation.  His application merely asserts that:

Leave to appeal is required and is appropriate, in the light of:

(a)       the importance of one or more of the issues to the parties; (b)        the course of the litigation to date;

(c)       the  novelty  and  significance  of  one  or  more  points  of  law  of procedure (e.g. the claim of apparent bias) and/or the substantive law (e.g. the issue of a buffer, in the context of Respondent’s fiduciary position, and the matrix of legal duties) in general; and

(d)       other matters relevant to the opportunity to appeal.

[20]     I do not see that this case raises any issues of sufficient importance, whether generally to the parties or otherwise, which justify further litigation.   The issues raised relate to rules of procedure, rules of evidence and contractual interpretation. The principles relevant to these issues are well-settled.

[21]     I acknowledge that as the case unfolded it became anything but simple.  But that was not because the questions of law were of a complicated or controversial nature.   Rather, the case became freighted with issues of deficient evidence and

procedural complexity.

4      Waller v Hider [1998] 1 NZLR 412 at 413.

[22]     Moreover,  the  amount  at  stake  here  is  modest.     The  Court  of  Appeal confirmed the relevance of this consideration in Waller v Hider:5

The amount at stake on the intended second appeal was $68,000 and interest but, if the appeal had succeeded, a consequential adjustment would then have been sought by the wife. Counsel for the husband conceded that she would have been entitled to some adjustment. So the appeal was actually about rather less than the figure just mentioned.

The cost to the litigants in coming to this Court, including preparation of submissions and written materials as required by the Practice Note for civil appeals, oral presentation of the substance of the case (at least half a day), travel and accommodation expenses of both counsel and other normal disbursements would not in the aggregate be much less than $10,000. (As best we can assess it, half as much again would be expended by the Court system in processing, hearing and determining the appeal.) To this can be added moneys already spent on the s 67 application in the High Court (and there was a cost to the system of that action). On a cost benefit analysis, the view may be taken that a second appeal would add unjustifiably to the burden already shouldered by these litigants. The limited chance of success on the s 67 application and again at any substantive hearing ought to be carefully weighed against the relatively modest net benefit sought by the applicant.

[23]     In my view, the relatively small amounts at issue do not justify the costs of further litigation.6

[24]     I decline leave to appeal.

Summary of decisions

[25]     I have granted Mr Kung’s application for refund of costs and the payment of

interest (as per [13] above).

[26]     I have directed that costs on the appeal heard by me will lie where they fall

(as per [16] above).

[27]     I have declined Mr Kung’s application for leave to appeal to the Court of

Appeal (as per [24] above).

5      Waller v Hider [1998] 1 NZLR 412 at 414.

6      I drew the parties’ attention to r 7.33 which provides that the Registrar must allocate a hearing date once an application for leave to appeal is filed. That was not done. However, Mr Thwaite has advised by memorandum dated 6 April 2017 that he does not require a hearing and so I have dealt with the application on the papers. I note that the respondent did not file any opposition or submissions.

Costs of these applications

[28]     Each party has had some success in these applications.  The costs of these applications will lie where they fall.

Brewer J