Leading Media Limited v Wang

[2015] NZHC 2378

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-1683 [2015] NZHC 2378

UNDER	the District Courts Act 1947
BETWEEN	LEADING MEDIA LIMITED Appellant
AND	YUEFENG (TONY) WANG Respondent

Hearing:	On the papers
Judgment:	30 September 2015

COSTS JUDGMENT OF DUFFY J

This judgment was delivered by me on 30 September 2015 at 4.30 pm pursuant to

Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Solicitors:

McMahon Butterworth Thompson, Auckland

Legal Vision, Auckland

LEADING MEDIA LTD v WANG [2015] NZHC 2378 [30 September 2015]

[1]      On 12 February 2015, I dismissed the appellant’s appeal against the District Court’s decision. In the District Court Judge Harrison had rejected the appellant’s claim against the respondent for breach of contract.  I found that the memorandum of understanding (MOU) upon which the appellant relied appeared to be unenforceable on the grounds of uncertainty, and in any event, neither the appellant nor respondent

was a party to the final version of the MOU and could not sue on its terms.1   I gave

the parties leave to file memoranda as to costs if they could not reach an agreement.

[2]      The respondent filed a revised memorandum as to costs on 12 March 2015 advising the Court that counsel had been unable to agree costs.  The parties agree that category 2B costs should be the basis of the award, however, the respondent submits that he is entitled to an uplift because the appellant pursued an argument that lacked merit and failed to accept an offer to settle.  The respondent also argues that he is entitled to costs for every step taken in the High Court, including filing the cross-appeal and the application for leave to file the cross appeal outside of the prescribed time limit.

[3]      The appellant submits that costs should be at a category 2B basis with no increase because, notwithstanding that the appeal was dismissed, the case was not hopeless from the outset.  Although the appellant accepts that the respondent should have costs for the cross-appeal the appellant submits that the costs of preparing and filing his application to file the cross appeal out of time was an indulgence for which the respondent should not be granted costs.   Further, before the appeal the parties filed a memorandum stating that the appropriate costs category was category 2B. The appellant submits that it should be able to rely on this.   Finally, the appellant rejects the respondent’s argument that the appellant failed to accept an offer to dispose of the proceeding noting that the correspondence relied on by the respondent

simply cautioned the appellant against bringing proceedings in the first place.

1      Leading Media Ltd v Wang [2015] NZHC 148 at [46].

Relevant Law

[4]      Costs are at the discretion of the court2 but in general the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds.3    Increased costs are governed by r 14.6 of the High Court Rules. Increased costs involve an increase in costs otherwise payable under the Rules.

[5]      The Court may order a party to pay increased costs if the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by failing to comply with the Rules or with a direction of the court or taking or pursuing  an  unnecessary step  or  an  argument  that  lacks  merit  (r  14.6(b)(i));  or failing, without reasonable justification, to accept an offer of settlement whether in the form of some other offer to settle or dispose of the proceeding (r 14.6(b)(v)).

[6]      Something more than mere failure of a factual or legal argument is necessary for there to be increased costs.4    Increased costs may be awarded where “there is failure by the paying party to act reasonably”,5 particularly considering the extent to which  the  failure  to  act  reasonably contributed  to  the time  and  expense of the proceeding.6  The costs will be uplifted from scale.7

Assessment

Pursuing an argument that lacks merit

[7]      The respondent’s argument for increased costs on the basis that the appeal lacked merit is based on comments made in both my judgment and the District Court Judge’s decision.  In his decision on costs Judge Harrison noted that he had indicated in his substantive decision that some uplift of costs would be appropriate because “at an early stage of the proceedings the defendant wrote at  length to the plaintiff

inviting discontinuance of the proceedings essentially for the same reasons contained

2      Rule 14.1.

3      Rule 14.2.

4      Nandro Homes Ltd v Datt HC Auckland CIV-2008-404-6676, 13 July 2009 at [11].

5      Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

6      Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24

NZTC 24,500 at [165].

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

in my decision which dismissed the plaintiff’s claim”.8   The Judge considered that an uplift of 25 per cent was appropriate “bearing in mind that although the plaintiff was invited to discontinue its case it could not be said that it was hopeless from the outset, and certainly the existence or otherwise of contractual commitments between the parties had to be considered.”9

[8]      The respondent also relies on a comment that I made in the judgment on appeal where I stated:10

Indeed, the appellant’s case involves the attempt by one person who is not a party to the MOU (namely the appellant) attempting to sue someone who is also not a party to the MOU (namely the respondent) for breach of its terms. This is plainly nonsense.

[9]     In my judgment I found that Judge Harrison had adopted the correct interpretation  of  cl  1  of  the  MOU  consistent  with  the  objective  understanding between the parties that the respondent did not take on stock liability.  I considered that the interpretation that the appellant submitted was correct could not be justified on an objective view of the clause.  I further found that the MOU was unenforceable on the grounds of uncertainty, as it was unclear whether cl 1, the clause upon which the appellant relied, was a part of the final version of the MOU.  I found that the final version of the MOU was the operative version.  Further, I found that neither party was a party to the final MOU and could not sue upon it.

[10]     While  the  District  Court  Judge  based  his  decision  primarily  on  the interpretation of the MOU, he noted that there was force to the submission that it was void for uncertainty on the basis that the respondent did not sign the two subsequent amendments to the MOU and further that it did not specify that the appellant was a party to it.

[11]     Accordingly, I upheld Judge Harrison’s decision in all respects, going further

than the Judge to find that neither party could sue on the MOU.

8      Leading Media Ltd v Wang DC Auckland CIV 2012-004-360, 7 August 2014 [Costs Decision] at

[1].

9 At [7].

10     Leading Media Ltd v Wang, above n 1, at [42].

[12]     Given that both this Court and the District Court were of the view that the appellant’s claim faced substantial hurdles I consider that some uplift to scale costs is warranted.

Failed without reasonable justification to accept offer to dispose of the proceedings

[13]     The respondent also argues that the appellant failed to accept an offer to dispose of the proceedings.  The respondent relies on two letters the first was sent prior to the District Court proceedings and the second just after the proceedings were initiated.   In the first, the respondent stated that “your clients’ claim has no basis whatsoever” and in the second that the claim was “implausible and potentially vexatious”.   In the second letter, the respondent stated that if the claim was not discontinued immediately, full indemnity costs would be sought.

[14]     Not all letters will constitute offers that lead to increased costs, only those that have actually made an offer that is vindicated by the quantum of damages. In Nandro Homes Ltd v Datt Asher J stated:11

[13]      The letter that was sent on behalf of Nandro by its lawyers, seeking to persuade the Datts to drop the second proceedings, was a detailed and intelligent  letter,  sent  for  the  justifiable  purpose  of  trying  to  stop  the litigation  at  that  point  and  save  further  costs.  However,  it  was  not a Calderbank letter. No offer was made which was later vindicated by the quantum  of  damages,  as  occurs  when  orders  are  made  on  the  basis  of a Calderbank letter. Rather, one party stated, as parties often do at the outset of proceedings, that it considered the other side's case to be hopeless. I do not consider that the sending of such a letter is a circumstance warranting a departure from the usual rule as to costs. It does not constitute a failure to accept an offer of settlement under r 14.6(3)(b)(v).

[15]     I consider that the letters sent by the respondent fall into this category in that they were letters stating the respondent’s belief that the appellant’s case was hopeless rather than an offer to settle the proceedings.  Accordingly, I do not consider that the letters justify an increase in costs.

[16]     The respondent submits that a 50 per cent uplift would be appropriate, given that the District Court Judge felt that a 25 per cent increase was necessary and the appellant persisted a second time in the same argument.

[17]     Given that there were some factual issues surrounding the terms of the MOU and the different versions I do not consider that a 50 per cent increase is warranted. In my view a 25 per cent uplift would adequately reflect the appellant’s failure to act reasonably by bringing the appeal.

Costs for filing the interlocutory application to bring the cross appeal out of time

[18]     The appellant argues that the respondent should not be able to get the costs of filing an interlocutory application for leave to file a cross appeal out of time.  The respondent states that if the appellant had not brought the appeal, he would not have been forced to bring the application. As the respondent was successful he is entitled to the costs for this step.

[19]     The respondent applied for leave six weeks after a Notice of Cross Appeal was  due.   The  application  notes  that  the respondent’s  ability to  apply financial resources to the appeal was constrained pending the appellant paying the District Court costs order on 29 August 2014.  Further, the respondent submitted that it was not until the respondent received the appellant’s submissions that it became apparent the appellant wished to restrict the respondent’s ability to rely on defences that were not decided by the District Court. The appellant did not oppose the application for leave.

[20]     Generally, the grant of an indulgence is made at the expense of a costs award against the party obtaining the indulgence.12    As the appellant did not oppose the application and it does not appear that the application was filed late because of the appellant, I consider that the respondent should not be entitled to costs for this step.

[21]     I consider that the respondent is entitled to costs at a category 2B for every step in the proceedings except for the filing of the interlocutory application for leave to cross appeal with a 25 per cent increase.

[22]     According to Schedule A in the respondent’s submissions the relevant steps

are:

11.       Filing memorandum for Mention hearing  0.4 (Joint Memorandum)

52.      Commencement of cross appeal  1.0

56.      Preparation of submissions  3.0

58.      Appearance at hearing  0.5

[23]     This amounts to 4.9 days meaning that scale costs at Category 2B would be

$9,751.

[24]     A 25 per cent uplift would bring the costs award to $12,188.75.

[25]     The respondent also claims disbursements of $540 which is the fee for filing the cross appeal. The recovery of this fee is reasonable.

Result

[26]     The  respondent  is  awarded  costs  of  $12,188.75  and  disbursements  of

$540.00.