Lau v Cutting

[2022] NZHC 562

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2020-404-1420

[2022] NZHC 562

BETWEEN

YICHUAN (JESSE) LIU KIN TO (STEVEN) LAU and DINAH QIU
Applicants

AND

DEREK EDWARD CUTTING

Respondent

Hearing:	On the papers
Appearances:	Mr Lau for Applicants (in person) G Keene for Respondent
Judgment:	24 March 2022

JUDGMENT OF DUFFY J

This judgment was delivered by me on 24 March 2022 at 4.00 pm pursuant to

Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Solicitors:

Skeates Law Ltd, Auckland

Gregory Keene, Barrister, Auckland

LAU v CUTTING [2022] NZHC 562 [24 March 2022]

[1]                 Kin To Lau is one of three self-represented applicants in this proceeding. He is the only one who takes an active role. As a self-represented litigant, he cannot act for the other applicants. Accordingly, I have treated Mr Lau as acting solely on his own behalf. I regard the other two applicants – who are Mr Lau’s wife Dinah Qiu and their son Yichuan Liu - as having taken no role in the proceeding.

[2]                 The respondent is Derek Cutting.  He is  a solicitor who was instructed by  Mr Lau and Ms Qiu to advise on their complaint about bullying and an assault experienced by their son at Auckland Grammar School. In turn Mr Cutting instructed a barrister, Geoffrey Keene, to act for these clients in relation to the complaint. The outcome of the complaint  was  not  to  the  applicants’ liking.  They  did  not  pay Mr Cutting the fees he was owed promptly and so he was obliged to commence legal proceedings for their recovery. Those  fees  included  a  fee  Mr  Cutting  owed  to Mr Keene for the work he had performed on instructions from Mr Cutting. This led Mr Cutting to commence proceedings in the District Court to recover the fees he was owed by the applicants (the debt recovery proceedings). Following a successful judgment in that Court there was an unsuccessful appeal to this Court. This led to a costs award in the District Court against the applicants. Belatedly and out of time  Mr Lau sought leave to appeal against the District Court costs judgment. I declined leave. Mr Cutting now seeks costs against Mr Lau.

[3]                 Mr Keene has represented Mr Cutting throughout in the debt recovery proceedings. Mr Keene also has a personal interest in those proceedings because they were brought essentially to recover fees that were generated by the barristerial work Mr Keene had performed on instructions from Mr Cutting.

[4]                 The traditional view has always been that barristers cannot sue for the fees they are owed. As they are instructed by a solicitor, the solicitor is the person responsible for paying their fees.1 This leaves the instructing solicitor in the position of being the person responsible for ensuring he or she has enough funds to cover the barrister’s fees. This can be done by requiring payment from lay clients in advance with those payments held in the solicitor’s trust account. If no advance payment is obtained and

1      McGuire v New Zealand Law Society [2019] NZHC 2748.

payment from the lay clients is not forthcoming following performance by the barrister, the solicitor is left in the position where he or she may have to sue the clients for the fees. When such legal action is taken, it is always taken in the name of the solicitor, who is the party ethically responsible to pay the barrister. Put shortly, in these circumstances there is no direct contractual relationship between the lay client and the barrister to support an action for recovery in debt.

[5]                 Since the debt recovery proceedings were commenced there has been a change in the solicitors on the record. Mr Cutting has retired as solicitor on the record and Graham Simpson now acts for Mr Cutting in this proceeding. Mr Simpson is now the solicitor instructing Mr Keene to act as counsel in the proceeding.

[6]                 The proceedings have a long, protracted history with hearings in the District Court, this Court and the Court of Appeal. Perhaps owing to Mr Lau and the other applicants being self-represented, the scope of matters before the Court for determination have sometimes strayed beyond their relevant parameters. This is something that happened in the case before me.

[7]                 On 6 July 2021 I issued a judgment (the leave application).2 The substantive determination before me was whether Mr Lau should be granted leave to appeal out of time two decisions of Judge Hinton in the District Court relating to costs awards made against the applicants. The first decision awarded interest, costs and disbursements to Mr Cutting and followed a decision in which Judge Hinton had found that Mr Lau and the other applicants were liable to pay Mr Cutting for the legal services they had received from him and Mr Keene.3 The second decision awarded costs to Mr Cutting following a failed attempt by Mr Lau to have the first decision recalled.4 The sums in issue were interest of $3,390.48, costs of $27,500 and disbursements of $4,000 arising from the first decision and costs of $4,300 arising from the second decision.5 Mr Cutting was also awarded costs of $382 for sealing the judgment of Judge Hinton.6

2      Liu v Cutting [2020] NZHC 1655.

3 At [13].

4 At [17].

5 At [18].

6 At [18].

[8]                 The leave application was unsuccessful. The present claim by Mr Cutting for an award of costs then followed. Mr Cutting as the named respondent in the leave application seeks the award of costs. Any such award is likely to be used towards payment of the further costs incurred by Mr Keene as a result of him continuing to appear in this proceeding as counsel for Mr Cutting.

[9]                 In response to Mr Cutting’s costs memorandum, Mr Lau sought to engage broader issues that had been raised in various other hearings that have followed the debt recovery proceedings.

[10]              On 17 August 2021 I issued a ruling in which I defined the parameters of the present costs application (the ruling).7 Subsequently and relevantly for the costs application, I issued minutes on 18 October 2021 and finally on 4 November 2021.8

[11]              The judgment I delivered on the leave application, the ruling I issued on     17 August 2021 and the two minutes that followed are to be read together with this judgment.

[12]In the memorandum dated 6 August 2021 Mr Cutting seeks scale costs of

$12,786.50. He seeks a 50 per cent uplift of $6,300, disbursements of $255.88 and costs on the costs application in the sum of $4,780.

[13]              In the ruling I identified the relevant issues for determination.9 I shall repeat them here:

(a)Should the usual rule that costs follow the event be applied here?

(b)If so, what are the appropriate scale costs owing?

(c)Should there be an uplift of 50 per cent or otherwise on the appropriate scale costs? and

7      Liu v Cutting HC Auckland CIV-2020-404-1420, 17 August 2021.

8      Liu v Cutting HC Auckland CIV-2020-404-1420, 18 October 2021; Liu v Cutting HC Auckland CIV-2020-404-1420, 4 November 2021.

9 At [19].

(d)Should Mr Cutting be awarded costs for the time and work spent on preparing the memoranda on costs?

[14]              Since Mr Cutting filed his costs memorandum there have been various exchanges of memoranda regarding costs. When Mr Cutting filed a reply memorandum he sought to add additional itemised costs to his schedule of costs. A reply is not for the purpose of adding items that were overlooked at the outset. The additional items lead to a small adjustment upwards of the costs claims, both for the costs following the leave application and the costs on the costs application. I propose to work from the costs claims that were first sought in the memorandum dated 6 August 2021 and to exclude from consideration the late additions. Mr Lau is to blame for the various exchanges of memoranda. However, the opposing party may not use this to their advantage by seeking additional costs for new items.

Should the usual rule apply?

[15]As the Supreme Court stated in Manukau Golf Club v Shoye Venture Limited:10

A fundamental principle applying to the determination of costs in all the general Courts in New Zealand is that costs follow the event.

[16]              The Supreme Court reinforced this statement by finding that a Court that applies this fundamental principle and awards costs within the normal range applicable does not have to give reasons for doing so. It is only when something out of the ordinary is being done that a reasoned explanation is required.11

[17]              Here I am satisfied that costs should follow the event. There is nothing out of the ordinary about the way in which Mr Cutting has conducted the proceeding that would justify departure from this fundamental principle. As the successful party in an application where Mr Lau pursued a hopeless quest for leave to appeal, I am satisfied that Mr Cutting is entitled to a costs award.

10     Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [8].

11 At [16].

[18]              Mr Lau has referred to the Court of Appeal’s judgment in Keene v Legal Complaints Review Officer12 where the Court of Appeal dismissed an appeal against a decision of Downs J refusing to award costs to Mr Keene despite him enjoying partial success in the High Court. However, the refusal to follow the usual rule and award costs to a successful party was because Mr Keene did not apply for costs despite being invited to do so in accordance with a timetable ordered by the High Court.13 It was Mr Keene’s failure to apply at the appropriate time for costs that led to Downs J finding there was no opportunity to do so later. An appeal against a costs decision is an appeal against the exercise of a discretion. The Court of Appeal found that Mr Keene could not identify the type of error that would leave the decision to refuse costs open to appeal.14 Those circumstances are very different from the circumstances before me. Here the applications for costs are timely and being determined by me at first instance. Moreover, the decision in Keene v Legal Complaints Review Officer recognises the inherently discretionary nature of decisions on costs.15 Here I see no reason not to apply the discretion in accordance with the generally recognised principle.

[19]              Further I reject the suggestion from Mr Lau that here Mr Keene is acting for himself; the proceedings have a disciplinary background and there has been no clear winner. The present proceeding is a separate proceeding from Keene v Legal Complaints Review Officer where Mr Keene was a named party and was acting for himself. Whilst the issues in Keene v Legal Complaints Review Officer would not have arisen but for this proceeding, each proceeding has its own specific legal issues. In this proceeding Mr Cutting has clearly been the winner. Also, I do not read Keene v Legal Complaints Review Officer as portraying Mr Keene as unfavourably as Mr Lau contends.

Scale costs

[20]              Mr Cutting has supplied a schedule of scale costs. The schedule takes account of the fact that the leave application hearing was adjourned part heard in order to give the parties an opportunity to look into the legality of the interest award in the District

12     Keene v Legal Complaints Review Officer [2021] NZCA 338.

13 At [27].

14 At [29].

15 At [29].

Court. The leave application judgment sets out in full details of my initial concerns about the legality of the interest award and my views in that regard.16 The hearing was adjourned to enable Mr Lau to have a better opportunity to enquire into the issue of the interest question. As it turned out, those enquires were of no assistance to him.

[21]              In those circumstances I am satisfied that it is appropriate for Mr Cutting to claim preparation of written submissions for the hearing on 24 November 2020 and preparation of further submissions for the resumed hearing on 16 March 2021. Additional legal work was required for the second set of submissions. Having looked at all the itemised procedural steps in the schedule of scale costs attached to the 6 August 2021 memorandum I am satisfied that they are appropriate. Accordingly, I find that, in principle, Mr Cutting is entitled to scale costs for 5.85 days.

[22]              Mr Cutting has sought scale costs at category 2B which is the category of costs generally applied in cases before this Court. I am satisfied that it would ordinarily be the appropriate scale for this case. Here Mr Cutting seeks increased cost. Whether these will be awarded first entails assessing the appropriate scale costs and then deciding if an uplift (increase) is warranted. I will return to this issue when I deal with the application for increased costs.

[23]              For the purpose of identifying the appropriate scale costs I note that at category 2B the costs come to $2,390 per day, which at 5.85 days comes to a total of $13,981.50. Mr Cutting seeks disbursements of $255.88 which I consider reasonable in the circumstances. This means that overall if awarded scale costs at category 2B plus disbursements he would be entitled to a grand total of $14,237.38.

Are increased costs warranted?

[24]              Mr Cutting seeks an uplift of 50 per cent or otherwise on the category 2B costs to  which  he  is  entitled.   The  application  for  increased  costs  is  brought  under   r 14.6(3)(b)(ii) and r 14.6(3)(d) of the High Court Rules 2016.

16     Liu v Cutting, above n 1, at [32]-[37].

[25]              Rule 14.6(3)(b)(ii) applies in circumstances where the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or a step in it by taking or pursing an unnecessary step or argument that lacks merit. This is the sub- rule that I consider most applicable to the present case.

[26]              Rule 14.6(3)(d) applies to circumstances where some other reason exists to justify the Court making an order for increased costs. This sub-rule tends to be applied to wasted costs situations where one party’s conduct causes a hearing to be abandoned or vacated. In a case like the present, where the conduct clearly falls within one of the other sub-rules of 14.6(3), I see no reason for reliance on r 14.6(3)(d) as well.

[27]              The approach to applications for increased costs was set out in Holdfast NZ Ltd v Selleys Pty Ltd.17 The first step is to identify the appropriate scale costs, which has already been done. The second step is to provide reasons to support the uplift.

[28]              Taking or pursuing an appeal or (as in this case) an application for leave to appeal that lacks merit can warrant an uplift from scale costs. Here the leave application totally lacked merit. As Mr Cutting points out in his submissions, the quantum of costs awarded in the District Court was less than what he had sought.  Mr Lau nevertheless chose to challenge it. Furthermore, he did not challenge it in a straightforward manner. The various unnecessary steps taken by Mr Lau are outlined in my leave application judgment. In that judgment I found there was no merit in the proposed appeal and that the delay occasioned by Mr Lau had prejudiced Mr Cutting.18

[29]              In a minute dated 21 September 2020, which imposed timetabling orders for the leave application, Woolford J observed that the applicants had been served with two sealed orders of the District Court dated 12 August 2020 for payment of sums of

$44,272.6819  and $4,682.   The close connection in time between service of those

sealed orders and the belated attempt to appeal the decisions that gave rise to the sealed orders led Woolford J to comment that the leave application was prompted by the service of the sealed orders. Mr Cutting says much the same in his costs memorandum

17     Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [40]-[48].

18     Liu v Cutting, above n 1, at [46].

19     This sum would also have included  the judgment sum of $10,500 which Judge Hinton found  Mr Cutting was owed.

dated 6 August 2021. I acknowledge that it is difficult to see any other reason why Mr Lau would have left challenging the District Court’s decisions until that date.

[30]              Mr Lau has not been able to provide a satisfactory explanation for why he left it so long to appeal against the costs decisions of Judge Hinton. The notion that he either brought the appeal to delay the inevitable day when payment of the sealed orders was required, or to give him a better bargaining position in relation to any compromise he may have been able to negotiate in relation to those payments, is irresistible.

[31]              When the conduct of Mr Lau in this proceeding is looked at in the round, I consider that something more than an award of scale costs is required here. Accordingly, I am satisfied an uplift of costs is warranted.

[32]              I have considered whether the uplift should be something less than 50 per cent. Mr Lau is a lay litigant and the genesis of the litigation was his concern that his son was bullied at school. However, since that time there have been numerous occasions when Mr Lau has appeared in the various Courts that have been seized with this litigation and successive Judges have made it clear to him that his attempts to deny payment of the debt he owes Mr Cutting are futile. Nevertheless, he has continued to oppose every step that Mr Cutting has taken to recover the payment he is properly owed. He has done so improperly by raising irrelevant and futile arguments that are often attempts by him to go over old arguments on which he has already failed. Moreover, Mr Lau has actively taken unnecessary and futile steps that have obstructed Mr Cutting’s attempts at debt recovery. Each such step has caused further delay and expense to Mr Cutting and it has ended in failure for Mr Lau.

[33]              There was one seemingly arguable issue in the leave application relating to the District Court Judge’s jurisdiction to impose interest in the circumstances outlined in my leave application judgment. However, on close inspection the concerns about this issue were shown to be baseless. In relation to this issue Mr Keene acted very responsibly at the first hearing of the leave application by agreeing to an adjournment part heard so that those concerns could be addressed. As matters turned out he was

able to find authority that confirmed Judge Hinton was not functus officio when he made the interest award.20

[34]              I consider an uplift of scale costs is warranted. However, I do not propose to award a 50 per cent uplift as sought by Mr Cutting. Whilst the balance of Mr Lau’s arguments lacked any merit whatsoever, the legality of the interest award warranted some enquiry. Although this argument also ultimately failed, the question it raised was not a hopeless question and finding its answer required some attention and care.

[35]              Accordingly, I propose to allow an uplift of 30 per cent. A 50 per cent uplift (which is what Mr Cutting seeks) is generally the uppermost limit of an award of increased costs. The conduct in this case is not so bad as to attract the uppermost limit.

[36]              A 30 per cent uplift on scale costs of $13,981.50 is $4,194.45 which brings the total costs to $18,175.95. I am satisfied the disbursements of $255.88 are reasonable and should be awarded.

Costs on the costs application

[37]              Mr Cutting seeks costs on the costs application. I am satisfied he is entitled to costs for this task. Resolving the question of costs was not easy. Mr Lau initially filed a substantial memorandum in which he repeated his views of the merits of his case and the conduct of Mr Keene. This was unacceptable. The time and place for advancing those arguments and criticisms of Mr Keene’s conduct had passed. Raising those arguments in the context of costs only added to the delay, which caused further prejudice to Mr Cutting, and led to more wasted time and effort as he had little option but to respond. In this regard Mr Cutting was required to file a memorandum objecting to the matters raised by Mr Lau. This was followed by a second memorandum from Mr Lau which was confined to the issues I identified in the minute of 17 August 2021. Mr Cutting then filed a reply memorandum.

[38]              The question of costs following the unsuccessful leave application should have been straightforward. Mr Lau made it unnecessarily complicated by continuing to

20     Liu v Cutting, above n 1, at [32]-[37].

raise hopeless arguments to which Mr Cutting was obliged to object. In such circumstances I am satisfied that Mr Cutting is entitled to the $4,780 costs that he seeks.

Result

[39]Mr Cutting is awarded increased costs of $18,175.95 and disbursements of

$255.88 for his successful opposition to the leave application.

[40]              Mr Cutting is also awarded costs of $4,780 for the preparation of the memorandum relating to awarding costs for the leave application.

Duffy J