Lee v District Court at Auckland

[2013] NZHC 1000

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-5404 [2013] NZHC 1000

UNDER  the Judicature Amendment Act 1972

IN THE MATTER OF     a costs decision made by the Auckland

District Court

BETWEEN  YOON LEE Applicant

ANDDISTRICT COURT AT AUCKLAND First Respondent

ANDZHI HONG GAO AND LIN GE Second Respondents

ANDJOHN CARTER, BRENT O'CALLAGHAN AND TIMOTHY UPTON SLACK

Third Respondents

Hearing:         20 February 2013

Appearances: Applicant in person

No appearance for First Respondent, abides the decision of the Court
P J McPherson for Second Respondents
K J M Robinson for Third Respondents

Judgment:      7 May 2013

JUDGMENT OF PETERS J

This judgment was delivered by Justice Peters on 7 May 2013 at 4.30 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date: ...................................

LEE V DISTRICT COURT AT AUCKLAND HC AK CIV-2012-404-5404 [7 May 2013]

[1]      This is an application for judicial review by the Applicant (“Mr Lee”), a solicitor, principally seeking review of orders made by judges of the District Court at Auckland.

[2]      The  First  Respondent  has  filed  an  appearance  but  otherwise  abides  the decision of the Court.  The Second Respondents (“the Gaos”) are former clients of Mr Lee, and the Third Respondents (“Carter & Partners”) are present or former partners of Carter & Partners, a firm of solicitors in Auckland. Together these parties oppose the application.

[3]      For the reasons given below, my view is that this application is without merit and I dismiss it accordingly.

Background

[4]      The application for review arises from proceedings that the Gaos commenced in the District Court at Auckland in 2007.  Mr Lee, the Gaos’ former solicitor, was the sole defendant at the outset of the proceedings.   Carter & Partners and other parties were joined subsequently.

[5]      The District Court proceedings themselves arose from events in 2005.  The Gaos  had  entered  into  an  agreement  to  purchase  a  vacant  site  (“lot  8”)  in  a subdivision in Auckland (“agreement”).  The vendor was a company referred to as “Pro Rata”.  The terms of the agreement, which the Gaos executed without seeking legal advice, required them to pay two deposits prior to settlement.  These deposits totalled $165,000 and constituted 60 per cent of the total purchase price of $275,000. Pro Rata was not the registered proprietor of lot 8 at the time of the agreement or, as it turned out, at any time thereafter.  Pro Rata was itself the proposed purchaser of several lots in the subdivision, including lot 8, from a group of companies referred to as “Coastal”.

[6]      After paying the first deposit of $27,500, the Gaos instructed Mr Lee to act for them on the purchase. Carter & Partners acted for Pro Rata.

[7]      The Gaos subsequently paid the second deposit of $137,500.

[8]      The agreement was to settle in October 2005.  Pro Rata had not acquired, and did not in the future acquire, title from Coastal.  Pro Rata was unable to pass title to the Gaos accordingly. Coastal subsequently cancelled its agreement with Pro Rata in respect of lot 8 and sold the lot to another party.   Carter & Partners had paid the deposits to Pro Rata upon receipt.  The Gaos were not able to retrieve from Pro Rata any portion of the funds paid as deposits.

[9]      The Gaos commenced proceedings in negligence against Mr Lee.   Mr Lee joined Carter & Partners to the proceedings.  The case was due to be heard by Judge Cunningham in the District Court in the week commencing 27 July 2009.  The trial did not proceed on that date for reasons to which I refer below.  Thereafter the Gaos joined Carter & Partners as second defendant and Carter & Partners cross claimed against Mr Lee.

[10]     The proceedings were heard in March 2010 before Judge Gittos.  The Judge gave his decision on 14 May 2010.  The Judge found that Mr Lee was negligent and gave judgment for the Gaos.  The Judge dismissed all claims against Carter & Partners.

[11]     Mr Lee appealed to the High Court and, pending that appeal, applied for a stay of proceedings.  That application came before Judge Joyce in July 2010, and is relevant to this proceeding for reasons given below.  Mr Lee also successfully sought leave from the High Court to adduce further evidence on appeal.

[12]     I allowed Mr Lee’s appeal in part and reduced the damages and costs that Judge Gittos had awarded to the Gaos.  I dismissed Mr Lee’s appeal against the judgment as it related to Carter & Partners and ordered him to pay Carter & Partners’ costs.  Both the High Court and Court of Appeal refused to grant Mr Lee leave to appeal to the Court of Appeal.

[13]     Mr Lee’s statement of claim in this proceeding does not comply with the High  Court  Rules.    Amongst  other  things,  the  pleading  does  not  identify  the decisions in respect of which he seeks review, nor the basis on which he does so. The decisions he challenges have had to be gleaned from his submissions and these are (in the order in which they arose) as follows.

[14]     The first is an order made by Judge Cunningham on 27 July 2009.

[15]     The second concerns the omission of a document from the trial bundle before the District Court.  Mr Lee submits that the outcome of the case would have been different had the document been included.

[16]     The third and fourth matters concern the disposal of Mr Lee’s application for stay of the judgment in the District Court, pending his appeal.   They concern an order that Judge Joyce made fixing costs on the proceedings as between Mr Lee and Carter & Partners and an order Judge Joyce made as to costs on the application for stay.

[17]     The fifth concerns the fact that Judge Gittos did not convene a hearing prior to issuing a judgment, subsequently superceded, on costs.

[18]     The sixth concerns orders made in the District Court as to Carter & Partners’ costs.  Mr Lee was ordered to pay the vast majority of these.  He contends that the Gaos should have been ordered to pay more and that the award was sufficiently disproportionate to offend the principle that costs should follow the event.

[19]     The Gaos’ and Carter & Partners’ case is that these matters ought not to be subject of applications for review.  In respect of most, if not all, Mr Lee had a right of appeal which he was required to exercise if he wished to challenge the decision. In addition, they say that this proceeding is a collateral attack on the decisions to date and should be dismissed on that basis.  As well as those objections in principle,

they submit that there is no substance to the complaints.  Each seeks an award of indemnity costs.

[20]     Mr Lee rejects the submission that the existence of a right of appeal precludes this application for review.   He contends that each matter has given rise to a continuing prejudice and that in such circumstances the Court retains power to intervene to correct the prejudice.  Mr Lee referred me to Nicholls v Registrar of the Court of Appeal.1

[21]     I  consider this  case  falls  well  short  of  the  circumstances, referred  to  in Nicholls, in which a Court retains a discretion to interfere on review.  I accept the overarching  submission  that  this  application  is  a  collateral  attack  on  earlier decisions. For the reasons given below, an award of indemnity costs is warranted.

Orders made by Judge Cunningham on 27 July 2009

[22]     Mr Lee seeks review of an order made by Judge Cunningham in the District Court at Auckland on 27 July 2009, declining leave to allow Mr Pidgeon QC to continue to appear as counsel for Mr Lee.

[23]     The trial was due to commence on 27 July 2009.  Remarks that Mr Pidgeon made to the Judge in opening made him susceptible to be called as a witness.  Those remarks concerned the circumstances in which Mr Lee had (shortly before trial) alleged that a representative of Carter & Partners had given Mr Lee an undertaking to retain the amount of the second deposit in trust pending settlement of the agreement. The undertaking was said to have been given in a telephone conversation between the two.  The case against Carter & Partners would change significantly if the giving of the alleged undertaking were proved.

[24]     In her decision the Judge recorded that she pointed out to Mr Pidgeon that he might be required to give evidence as to how Mr Lee had come to raise the undertaking with him, given his remarks.   Counsel for the Gaos  and  Carter &

Partners  appear  to  have  made  it  clear  to  the  Judge  that  they  might  require

1 Nicholls v Registrar of the Court of Appeal [1998] 2 NZLR 385 (CA) at 436 and 437.

Mr Pidgeon to give evidence in the proceeding, such was the importance of the undertaking and some explanation as to why it had not been raised much earlier.

[25]     Given   that   he   was   at   risk   of   being   called   to   give   evidence, Mr Pidgeon required leave to continue as counsel.  The Judge refused to grant leave, saying:2

[18]      So regrettably for everyone, because this has been going on since

2006, I think in fairness I must decline Mr Pidgeon’s application for leave to continue as counsel because there does seem to be a real potential for him to be called as a witness.

[26]     Mr Lee submits that he was prejudiced by that ruling and that, with the benefit of hindsight, it was unnecessary because Mr Pidgeon was not in fact called as a witness when the trial was held, some eight months later.  The short answer to this point is that it was open to Mr Lee to appeal Judge Cunningham’s ruling if he wished.  He did not do so and was represented by counsel at the trial and on appeal. There is no basis on which the decision can be challenged now.

Omission from the trial bundle before Judge Gittos

[27]     Mr Lee submits that he was prejudiced by the omission of a document from the trial bundle before Judge Gittos when he heard the proceedings and submits that prejudice continues, notwithstanding his appeal to the High Court.

[28]     The prejudice to which Mr Lee refers arises from a failure to include in the trial bundle a final form of a Deed of Assignment dated 6 September 2005 (“Deed”) between Pro Rata as assignor and Coastal as assignee.   The Gaos’ legal advisors included a draft of the Deed in the trial bundle but, in error, omitted the final form of the Deed.   It was, of course, open to Mr Lee’s counsel in the District Court and High Court to produce the final form of Deed if they wished.

[29]     The Deed was entered into after Pro Rata had defaulted under one or more of its own agreements with Coastal. Pursuant to the Deed, Pro Rata assigned to Coastal its  interest  in  its  (that  is  Pro  Rata’s)  agreements  with  third  parties,  including

Pro Rata’s agreement with the Gaos.   In return for this and other consideration, Coastal was to refrain from cancelling its agreements to sell to Pro Rata, again including the agreement in respect of lot 8.  Pro Rata did not, however, comply with the terms of the Deed and Coastal did cancel its agreement in respect of lot 8. Coastal sold that lot to another party.

[30]     I consider the Deed wholly irrelevant to the claim that the Gaos brought against Mr Lee and that Mr Lee brought against Carter & Partners.  I do not consider the omission of the final form of the Deed might have affected the outcome of the proceedings in any way.

Matters before Judge Joyce

[31]     Mr Lee applied to the District Court for a stay of proceedings following receipt of Judge Gittos’s May 2010  decision.   The Gaos  and Carter & Partners opposed the application.  Absent a stay, the Gaos were entitled to be paid the sum due and to enforce the judgment if necessary, appeal or no appeal.   Likewise, the Gaos and Carter & Partners were entitled to have their costs fixed and to recover such sum as might be due to them.  Accordingly, the Gaos and Carter & Partners were under no obligation to consent to Mr Lee’s application if they did not wish to do so.

[32]     When the application came before Judge Joyce on 12 July 2010, Mr Lee proposed that the parties should be secured by a charging order on a property he owned. The Judge adjourned the application until 16 July 2010.

[33]     A charging order may only be given in favour of a party who has obtained a judgment or order for the payment of money.  The Gaos had such a judgment and so were able to accept Mr Lee’s offer if they wished to do so.  Carter & Partners did not have the required judgment or order, as costs in the District Court had not then been resolved.

[34]     As a result, Mr Lee and Carter & Partners agreed that the latter could seal an order for payment of the costs they had claimed in the District Court proceedings,

subject to Mr Lee having a right to challenge the costs at a later time if he wished. Judge Joyce then made an order fixing Carter & Partners’ costs,  as the parties wished, noting the reservation in Mr Lee’s favour.  These steps were taken so that Mr Lee could have the stay he sought.

[35]     Mr Lee now questions whether it was open to the Judge to make such an order.    I am not aware of any reason which would preclude such an order but, regardless, the purpose of the order was to allow Mr Lee the stay that he sought and of which he had the benefit pending appeal.

[36]     The other matter with which Mr Lee takes issue is the order for costs that Judge Joyce made against him on the application for stay.  Costs are in the discretion of the Court.  For that reason it is difficult to challenge such awards on appeal, let alone review.3

[37]     Mr Lee submits the Judge should not have made the order, as costs follow the event and he was successful in obtaining the stay.  It was open to Mr Lee to make these arguments to the Judge at the time if he wished, and he may well have done so. The Judge’s reasons for making the order are set out in his judgment.  He took the view that Mr Lee had been unreasonable prior to 12 July 2010, in that he had proposed that the Gaos and Carter & Partners should consent to a stay on the basis of a personal undertaking from him, in lieu of other security.  Moreover, as counsel for the Gaos and Carter & Partners submitted, I considered (and did not alter) the order that the Judge made when I fixed costs after the appeal.  There is no basis for revisiting the matter now.

Orders on costs made by Judge Gittos

[38]     Mr Lee also seeks review of orders that Judge Gittos made as to costs on the proceedings in the District Court.

[39]     The Judge reserved costs in his judgment in May 2010, said the parties should file submissions as to costs if they were unable to agree, and reserved leave to the parties to apply for a hearing on the issue of costs if any of them wished.

[40]     The parties filed submissions on costs, none applied for a hearing, and Judge Gittos issued a decision on costs on 24 August 2010.  The Judge ordered Mr Lee to pay costs to the Gaos on a 2B basis, an order I varied after the appeal.  The Judge made no order as to costs between Mr Lee and Carter & Partners, as he thought (wrongly) that matters as to costs between Mr Lee and Carter & Partners had been resolved finally by a consent memorandum.  Carter & Partners drew the error to the Judge’s attention at a later date.  Having become aware of the error, the Judge issued a further judgment dated 14 August 2012 in which he stated he was functus officio.

[41]      Mr Lee submits that the Judge “failed to act judiciously because he did not hear costs argument despite reserving leave for the litigants to argue costs”.  There can be no objection to resolving costs on the papers as the Judge did.   If Mr Lee wished there to be a hearing about costs, it was open to him to request one.  In any event, I revisited the matter of costs in the District Court after the appeal to the High Court.  There could be no dispute that Carter & Partners were entitled to costs in the District Court and on appeal. They had been entirely successful in both instances.

[42]     Mr Lee also submitted that, if Carter & Partners were to have an award of costs in the District Court, then those costs ought to be shared equally by the Gaos and Mr Lee as both had claimed against Carter & Partners and both had failed. Mr Lee was ordered to pay the vast majority of those costs.

[43]     Counsel for Carter & Partners advised that the division of costs reflected the fact that Mr Lee proceeded against Carter & Partners from the outset whereas the Gaos had only claimed against Carter & Partners when Mr Lee alleged that he had been given an oral undertaking.  The giving of the undertaking was disputed and, ultimately, not proved to have been given.  It was a matter which rested entirely on Mr Lee’s account of the telephone conversation being accepted by the Judge.  The Judge  did  not  accept  that  any  such  undertaking  was  given.    In  all  of  these

circumstances I am not satisfied that any different costs order should have been made.

Costs

[44]     When I set this matter down I directed that the parties should be prepared to address the matter of costs in the proceedings.  All concerned did so and I do not require further submissions or a further hearing.

[45]     The Gaos and Carter & Partners seek an award of indemnity costs or, failing that, an award of increased costs.

[46]     The circumstances in which the Court may grant such costs are provided for in High Court Rules, r 14.6.  An award of indemnity costs is appropriate because I consider Mr Lee has acted vexatiously, frivolously, improperly or unnecessarily in commencing and continuing this proceeding.   None of the decisions Mr Lee has challenged are susceptible to review. There was no basis for this proceeding.

Result

[47]     I dismiss this application for review and make an order that Mr Lee pay the Gaos’ and Carter & Partners’ costs in the proceedings on an indemnity basis.  Those costs are to be fixed by the Registrar in the event of dispute.

..................................................................

M Peters J

Solicitors:         Y B Lee, Auckland:  [email protected]

Crown Law, Wellington:  [email protected]

Hesketh Henry, Auckland:  [email protected]

McElroys, Auckland:  [email protected]