Lai v Huang
[2018] NZHC 322
•5 March 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2016-404-1535 [2018] NZHC 322
BETWEEN SOPHIE LAI also known as SHU-HWA LAI
First Plaintiff
RICHARD HUANG Second Plaintiff
AND
LIU SHUN-MEI HUANG as executrix of the ESTATE OF HSIU-LIN HUANG
First Defendant
CHUN-CHING HUANG Second Defendant
CHUN-TA HUANG Third Defendant
Hearing: On the papers Counsel:
R Reed and A Manuson for Plaintiffs
J R Robertson and C Jiang for DefendantsJudgment:
5 March 2018
JUDGMENT OF THOMAS J (COSTS)
This judgment was delivered by me on 5 March 2018 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:………………………….
Solicitors:
Prestige Lawyers Limited, Auckland for Plaintiffs
Glaister Ennor, Auckland for Defendants
LAI v HUANG [2018] NZHC 322 [5 March 2018]
Introduction
[1] By my decision dated 25 November 2016,1 I struck out the third and fourth causes of action pleaded in the statement of claim dated 1 July 2016 and ordered security for costs of $10,000 to be paid.
[2] I observed that, having been generally successful, the defendants were entitled to some degree of costs in respect of their application to strike out. I invited submissions if the parties were unable to agree.
[3] The plaintiffs appealed the judgment and the parties agreed to stay costs pending determination of the appeal. The Court of Appeal dismissed the plaintiffs’ appeal in November 2017.2
[4] The defendants seek costs against the plaintiffs in relation to the High Court proceedings. The parties have been unable to agree.
The law
[5] Costs are at the discretion of the Court, qualified by the principles in the High Court Rules 2016.3 The intent of the Rules is to provide reliable and expeditious costs decisions and to do justice to both parties.4 The general principle is that costs follow the event unless particular considerations indicate otherwise.5
Submissions
[6] The parties agree Category 2 is the appropriate categorisation of the proceeding, it being of average complexity requiring counsel of skill and experience
considered average.
1 Lai v Huang [2016] NZHC 2828.
2 Lai v Huang [2017] NZCA 499.
3 High Court Rules 2016, r 14.1(1)–(2); and Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7]–[8].
4 High Court Rules 2016, r 14.2(g).
5 Rule 14.2(1)(a); and Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR
523 at [19].
[7] The parties disagree as to the band, the defendants submitting band C is appropriate, whereas the plaintiffs contend for band B.
[8] The defendants acknowledge that a reduction is appropriate to reflect the defendants’ unsuccessful attempt to strike out the plaintiffs’ claim under the Property (Relationships) Act 1976 (PRA). However, they seek a 50 per cent uplift in respect of the plaintiffs’ claims under the Law Reform (Testamentary Promises) Act 1949 (TPA) and the Family Protection Act 1955 (FPA) given the defendants were successful in their attempt to have those causes of action struck out.
[9] The plaintiffs submit an 80 per cent reduction to 2B costs should be made because the defendants were partially successful only in their claim.
[10] The defendants also seek 2B scale costs of 0.4 of a day for the filing of their reply memorandum on costs.
Issues
[11] The questions for me to address are:
(a) Should costs be categorised as band B or band C?
(b) Should costs be reduced?
(c) Should costs be increased?
(d) Are the defendants entitled to costs in relation to costs?
Band B or band C?
[12] The issue is whether a “comparatively large amount of time for the particular steps is considered reasonable”, in which case band C should be allocated, or whether a “normal amount of time is considered reasonable”, in which case band B should be allocated.
[13] The plaintiffs submit a normal amount of time would be reasonable, saying the defendants have not provided any reasons to justify a departure from band B.
[14] The defendants submit band C is appropriate, saying the plaintiffs’ pleadings were unduly lengthy and discursive. The statement of claim was 23 pages long with
111 paragraphs. This, the defendants say, required them to respond with a large volume of evidence to rebut the plaintiffs’ wide-ranging allegations.
[15] The defendants then refer to the plaintiffs’ extensive evidence in opposition, which also, in their submission, contained wide-ranging allegations requiring the defendants to file significant reply evidence. Finally, the defendants say preparation for submissions and the hearing was lengthy as they were required to canvas significant evidence in relation to the background and distribution of the deceased’s estate.
[16] I agree in the main with the defendants’ submissions.
[17] The determination of reasonable time is undertaken on a step by step basis. In my assessment band C is appropriate for the filing of the application to strike out and the preparation of written submissions. In respect of the other steps, band B applies.
Should costs be reduced?
[18] Costs may be reduced or refused for a variety of reasons, including where the successful party has failed in relation to a cause of action which significantly increased the costs of the party opposing costs,6 the party claiming costs took steps or pursued arguments which lacked merit,7 or failed to admit facts or evidence without reasonable justification.8
[19] The defendants submit a 20 per cent discount for their unsuccessful attempt to strike out the plaintiffs’ PRA claim is appropriate. The plaintiffs submit an 80 per cent
reduction in costs should be made.
6 High Court Rules 2016, r 14.7(d).
7 Rule 14.7(f)(ii).
8 Rule 14.7(f)(iii).
[20] The defendants were unsuccessful in the application to strike out the PRA cause of action. There was a reasonable basis for the application but it occupied a relatively small amount of time at the hearing and in the decision. The bulk of the hearing time and decision was spent on the successful application to strike out the TPA and FPA causes of action.
[21] Furthermore, the defendants were successful in their application for security for costs.
[22] The plaintiffs seek to justify their contended 80 percent reduction for two reasons. First, they allege the defendants changed their position on their strikeout application at the hearing by pursuing only the applications to strike out the PRA, TPA and FPA causes of action rather than all the causes of action. The plaintiffs say, as a result of the application, they incurred unnecessary costs in preparing their opposition. Secondly, the plaintiffs say the defendants were only partially successful.
[23] The application was framed by seeking first a strikeout of the TPA, FPA and PRA causes of action, secondly striking out the plaintiffs’ claims against the first defendant in her capacity as executrix of the estate, and thirdly seeking such further relief as the Court deemed fit. The latter include striking out the remaining causes of action and/or staying the PRA claim until commencement of proceedings in the Family Court.
[24] In my decision, I said:9
[86] The application requested such further or alternative relief as the Court deemed just, including striking out the remaining causes of action and dismissing the proceeding altogether. Neither counsel dealt with this element of the application in submissions and I will not either. I will observe, however, that the statement of claim needs to be re-pleaded, in particular dealing with the ownership of Coatesville Farm and the need to join the trustees of the Trust in their capacity as trustees. The plaintiffs need to reconsider their claims to the extent they allege breach of Mrs Huang’s obligations as executrix,10 in respect of which there does not appear to be a cause of action, although the pleading is somewhat confused. Although referred to in the application, this was not addressed in formal argument. The sixth cause of action also requires reconsideration, given the ownership of Coatesville Farm.
9 Lai v Huang, above n 1.
10 Administration Act 1969, s 47(4).
[25] It is patently clear, therefore, that there were significant problems with the remainder of the plaintiffs’ claim and it required repleading.
[26] The real focus of the application, submissions and decision was the causes of action under the TPA and FPA. However, as is evident from the above quote, there were considerable problems with the pleading in its entirety. That the defendants framed their application as they did can hardly be criticised.
[27] I reject the submission made by the plaintiffs that the strikeout application was an unnecessary step because it would not finally dispose of the proceeding. The plaintiffs cite Apple Fields Ltd v New Zealand Apple and Pear Marketing Board.11
The plaintiffs incorrectly say the Court there made observations against pursuing a strikeout application where it would only be a partial strikeout. The case is not authority for that proposition at all. The case was an administrative law decision where the defendants succeeded in striking out three of six causes of action. All the causes of action, however, related to the interpretation of the Apple and Pear Marketing Act
1971. In his concluding paragraph, the Judge noted that, when the matter was last called before him, he made it plain the application should not be pursued unless it was likely finally to dispose of the proceeding. The Judge’s observations were clearly in the context of that particular case only where all causes of action related to the same issue, that is, interpretation of one statute. This case is quite different, concerning as it did causes of action under multiple different heads.
[28] The application for strikeout of the TPA and FPA proceedings succeeded. As the estate had been wholly distributed, the claims were time barred by s 6 of the TPA and s 9 of the FPA. The defendants were entitled to apply for a strikeout and it was entirely proper they did.
[29] For these reasons, I reject the plaintiffs’ submission that costs should be reduced by 80 per cent.
11 Apple Fields Ltd v New Zealand Apple and Pear Marketing Board HC Wellington CP35/94,
21 April 1994.
[30] It is appropriate to reduce the costs awarded to the defendants to reflect their unsuccessful attempt to strike out the PRA claim. I agree with the defendants that
20 per cent is the appropriate amount.
Should costs be increased?
[31] Increased costs can be awarded if, under r 14.6(3)(b):
(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
…
(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; …
[32] Bradbury v Westpac Banking Corporation is the leading case on increased and indemnity costs and the principles from that judgment have recently been confirmed by the Court of Appeal.12 In Bradbury, the Court of Appeal described increased costs as warranted where “there is failure by the paying party to act reasonably”.13
[33] The defendants seek a 50 per cent uplift for three reasons. First, the plaintiffs unnecessarily issued and continued with FPA and TPA claims despite having been informed on numerous occasions that the estate was completely distributed on
31 October 2014 and that claims would be time barred. Secondly, the plaintiffs produced evidentiary material to the Court which was largely inappropriate for legal submissions. Finally, the defendants attempted to reach agreement on the FPA and TPA issues on numerous occasions but attempts were met with threats of indemnity costs being claimed against the defendants.
[34] The plaintiffs oppose increased costs and say any attempt by the defendants to reach agreement on the FPA and TPA issues is irrelevant as no offer of settlement was
made.
12 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400; and Ben Nevis
Forestry Ventures Ltd v Commissioner of Inland Revenue [2014] NZCA 348, (2014)
22 PRNZ 322.13 At [27(b)].
[35] I am satisfied the plaintiffs contributed unnecessarily to the time and expense of the proceeding. They did so by failing without reasonable justification to acknowledge that the TPA and FPA claims were time barred, something which was patently obvious from the affidavit evidence. The plaintiffs failed to act reasonably in refusing to withdraw those claims. An uplift of 40 per cent is appropriate.
Are the defendants entitled to costs in relation to costs?
[36] The Court has a discretion to award costs in relation to the preparation of memoranda in support of costs.14
[37] I agree with the defendants that the plaintiffs have acted unreasonably in opposing the defendants’ costs, in particular by seeking an 80 per cent reduction. That submission had no prospect of success and required a response from the defendants which should not have been necessary. 2B scale costs of 0.4 of a day for filing a memorandum is awarded in this regard.
Result
[38] For the reasons given, costs are awarded to the defendants as follows:
(a) costs on a 2B basis except as specified;
(b)costs on a 2C basis for the steps of filing the interlocutory application to strike out and preparation of written submissions;
(c) a 20 per cent reduction of that subtotal for the defendants’ unsuccessful attempt to strike out the PRA claim;
14 Harley v Registrar-General of Land HC Wellington CIV-2009-485-2167, 23 September 2010
at [6]; and Bloor v IAG New Zealand Ltd HC Rotorua CIV-2004-463-425, 3 February 2011 at [29].
(d) a 40 per cent uplift on the resulting subtotal as increased costs; and
(e) $892.00 for the costs memorandum.
Thomas J
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