Lee v Lee

[2020] NZHC 612

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2015-404-001648

[2020] NZHC 612

BETWEEN

HYUNG SOO LEE

Plaintiff

AND

YONGWOO LEE & ANOR

Defendants

Hearing:	On the papers
Counsel:	T C Goatley & K M Wilson or the Plaintiff No appearances for the Defendants
Judgment:	23 March 2020

JUDGMENT OF VAN BOHEMEN J

(as to costs)

This judgment was delivered by me on 23 March 2020 at 3.30pm Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

Solicitors/Counsel: Bell Gully, Auckland

LEE v LEE & ANOR [2020] NZHC 612 [23 March 2020]

[1]    On 30 November 2018, I issued a judgment in favour of the plaintiff, Hyung Soo (Henry) Lee, awarding him $150,000 in compensatory damages jointly and severally against Yongwoo (Steve) Lee and the New Zealand Sunday Times Ltd.1 For the reasons I gave, I held that the defendants had defamed the plaintiff in the “Seed of Dispute” article written by Steve Lee and published by the Korean language publication, New Zealand Sunday Times, on 13 March 2015 concerning the plaintiff’s involvement in fundraising arrangements by the Korean Society of Auckland for the purchase of the Korean Cultural Community Centre.

[2]    I also held that the plaintiff was entitled to costs on a 2B basis with reasonable disbursements to be fixed by the Registrar. I gave leave to the parties to file memoranda of no more than five pages each in the event of disagreement.

[3]    In her memorandum in respect of costs dated 15 May 2019, counsel for the plaintiff informed the Court that the plaintiff had been unable to correspond successfully with the defendants’ solicitors and counsel as to costs. In their memorandum, counsel for the plaintiffs sought scale costs of $70,022.00 with an uplift of 75 per cent and disbursements of $82,926.16.

[4]    On 16 May 2019, the defendants’ previous solicitor filed a notice of change of solicitor, informing the Court they no longer acted for the defendants.

[5]    As of 3 October 2019, the Court had not received any notification regarding the appointment of alternative solicitors.

[6]    By minute dated 3 October 2019, I gave the defendants until 25 October 2019 to file a memorandum in response to the plaintiff’s memorandum.

[7]    The Court has not received any response to that minute. Accordingly, and as indicated in my minute of 3 October 2019, I now determine the plaintiff’s question of costs based on the plaintiff’s memorandum alone.

1      Hyung Soo Lee v Yongwoo Lee [2018] NZHC 3136.

[8]    I regret the length of time it has taken to attend to the plaintiff’s application and apologise to the plaintiff and counsel for the delay. The delay was due to ill health on my part last year, which required treatment and time away from the Court, and the need on my return to attend to outstanding substantive judgments.

The plaintiff’s position on costs

[9]    The plaintiff seeks costs of $70,022.00, calculated on a 2B basis, together with a 75 per cent uplift.

[10]   Counsel for the plaintiff say this significant uplift is warranted in terms of     rr 14.6 and 14.10 of the High Court Rules 2016. They say the plaintiff made three Calderbank offers, all of which the defendant rejected and all of which would have resulted in outcomes more favourable to the defendants than that provided for in my judgment of 30 November 2018. Counsel say the defendants failed to engage meaningfully with any of their proposed settlement efforts, that their rejections of the settlement offers were unreasonable and that these factors significantly contributed to and increased the time and expense incurred by the plaintiff in successfully prosecuting the proceeding.

[11]   Counsel for the plaintiffs also say an uplift is warranted because the defendants did not take down from their website the article containing the statements my judgment of 30 November 2018 found to be defamatory and repeated the defamatory allegations in article published in the New Zealand Sunday Times on 7 December 2018.

Relevant principles

[12]   Costs are at the discretion of the Court,2 subject to the guidance contained in the High Court Rules 2016, and especially the principle that the determination of costs should be predictable and expeditious.3

[13]   Ordinarily, the award of costs will reflect a sum equal to two-thirds of the successful party’s costs considered reasonable for the proceeding, or step in a

2      High Court Rules 2016, r 14.1(1).

3      Rule 14.2(g).

proceeding.4 The regime is designed to provide less than full costs recovery in order to represent a reasonable contribution to the costs incurred by the successful party in protecting their interests, while balancing access to justice.5 However, the High Court Rules 2016 provide that a party can seek increased costs in accordance with r 14.6 which provides:

14.6     Increased costs and indemnity costs

(1)Despite rules 14.2 to 14.5, the court may make an order—

(a)increasing costs otherwise payable under those rules (increased costs);

[…]

(2)The court may make the order at any stage of a proceeding and in relation to any step in it.

(3)The court may order a party to pay increased costs if—

(a)       […]

(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

[…]

(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; […]

[14]   Rules 14.10 and 14.11 provide that Calderbank offers may be brought to the attention of the Court and taken into consideration in an award of costs as follows:

14.10Written offers without prejudice except as to costs

(1)A party to a proceeding may make a written offer to another party at any time that—

(a)is expressly stated to be without prejudice except as to costs; and

(b)relates to an issue in the proceeding.

(2)The fact that the offer has been made must not be communicated to the court until the question of costs is to be decided.

4      McGechan on Procedure (online ed, Thomson Reuters) at HR 14.4.01.

5      Green v Police [2019] NZHC 1019 at [15].

14.11Effect on costs

(1)The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.

(2)Subclauses (3) and (4)—

(a)are subject to subclause (1); and

(b)do not limit rule 14.6 or 14.7; and

(c)apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).

(3)Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A—

(a)offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or

(b)makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.

(4)The offer may be taken into account, if party A makes an offer that—

(a)does not fall within paragraph (a) or (b) of subclause (3); and

(b)is close to the value or benefit of the judgment obtained by party B.

[15]   The reasonableness of a party’s rejection of a settlement offer must be assessed at the time it was rejected,6 having regard to the size and timing of the offer, the reasonable expectations of the offeror at the time, and the parties’ ability to assess the merits of the case.7 The effect on costs of a r 14.10 offer is, ultimately, however at the court’s discretion.8 Importantly, while an offer made in accordance with rr 14.10 and

14.11 may be brought to the Court’s attention in accordance with those rules, whether the offer warrants an uplift in costs is determined in accordance with r 14.6.

The judgment of 30 November 2018

[16]   Given the plaintiff’s reliance on the making of several Calderbank offers in support of the application for increased costs, it is necessary to record relevant findings

6      Detection Services Ltd v Pickering [2019] NZHC 638 at [33], citing New Zealand Sports Merchandising Ltd v DSL Logistics Ltd HC Auckland CIV-2009-404-5548, 19 August 2010.

7      Samson v Mourant [2016] NZHC 1119 at [44], citing Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].

8      High Court Rules, r 14.11.

in the judgment of 30 November 2018 and the terms of those offers in order to assess whether those offers were rejected unreasonably.

[17]   The defendants admitted the fifteen imputations pleaded by the plaintiff. The issue at and after trial, but before judgment, was whether the defendants could avail themselves of the defences of truth,9 honest opinion,10 and public interest communication as recognised by the Court of Appeal in Durie v Gardiner.11 That decision was released after the hearing but counsel were able to make submissions on it before my judgment was finalised.

[18]   In my judgment, I found the defendants had proved the truth of one imputation and had made out the defence of honest opinion with regard to another seven imputations.12 With regard to the new defence of public interest communication, I accepted that the subject matter of the article was in the public interest13 but held that publication of the article was not responsible when regard was had to the factors identified in the Court of Appeal in Durie v Gardiner;14 particularly the defendants’ failure to seek the views of the plaintiff before publishing serious allegations.15

[19]   Accordingly, the defendants’ affirmative defences failed in respect of the seven remaining defamatory imputations.

The Calderbank offers

[20]    The first offer was made in a letter from the plaintiff’s counsel dated 11 August 2016. The plaintiff offered to discontinue the proceedings if the defendants paid the plaintiff’s legal fees (then $32,000), arranged for publication in Auckland’s four Korean community newspapers of a substantial statement of apology prepared by the plaintiffs, and did not seek costs. The offer set out the reasons why the plaintiff believed the defendants could not successfully defend the plaintiff’s claim.

9      See Defamation Act 1992, s 8.

10     See s 9.

11     See Durie v Gardiner [2018] 3 NZLR 131, [2018] NZCA 278.

12 At [167].

13 At [182].

14     Durie v Gardiner, above n 11, at [58]-[68].

15     At [192]-[197].

[21]   The first offer was rejected by letter dated 19 August 2016 from the defendants’ solicitors in which the defendants said that, for the reasons set out in the pleadings, they did not accept that the article was defamatory and that, in any event, the defendant’s affirmative defences applied.

[22]   The second offer was made in a letter dated 30 August 2017 from the plaintiff’s counsel to the defendants’ counsel. The essence of the offer was to discontinue the proceedings provided the defendants published in four Korean community newspapers a substantial statement prepared by the plaintiffs and donated $50,000 to the Korean Society of Auckland.

[23]   The second offer was declined in a letter from the defendants’ (new) solicitors dated 31 August 2017 which was dismissive of the plaintiff’s offer.

[24]   The third offer was made in a letter dated 12 March 2018 from the plaintiff’s counsel to the defendants’ counsel. It proposed that the defendants publish a shorter statement in the defendants’ publication, New Zealand Sunday Times, provide a signed version of the statement to the plaintiff on New Zealand Sunday Times letterhead and provide signed undertakings by the defendants not to make disparaging, defamatory, derogatory, or otherwise negative statements regarding the plaintiff in the future.

[25]   By letter dated 15 March 2018, the defendants’ solicitors offered, as a counter- proposal, the defendants’ version of a statement that might be published or, as an alternative, offered to publish the plaintiff’s response to the “Seed of Dispute” article. In that letter, the defendant’s solicitor said they could accept other conditions proposed by the plaintiff provided that the statement about disparaging, defamatory, derogatory, or otherwise negative statements was limited to events prior to the date of settlement. The letter explained that the defendants could not agree not to publicise or comment on future actions by the plaintiff if those actions were newsworthy and the comments the defendants wished to make were justified.

[26]   Negotiations continued in letters dated 21 March 2018 from the plaintiff’s counsel, 23 March 2018 from the defendants’ solicitors and 28 March 2018 from the plaintiffs’ counsel. In the last letter, the plaintiff’s counsel said that in order to achieve

a full and final settlement the plaintiff required, among other things, signed undertakings by the plaintiffs not to make any disparaging, defamatory, derogatory or otherwise negative statements about the plaintiff, his family or any entity associated with him regarding any matter relating to the acquisition of the Korean Cultural Community Centre and the Korean Society of Auckland or any litigation between any party mentioned in the proceeding in any forum in the future.

[27]    On 29 March 2018, the defendants effectively terminated negotiations by rejecting the plaintiff’s most recent offer and insisting that the plaintiff file its briefs of evidence forthwith.

Discussion

[28]   Acceptance of the plaintiff’s offers would have been significantly better for the defendants in financial terms than they achieved at trial. The amounts the plaintiffs proposed that the defendants pay as part of settlement were considerably smaller than the award of $150,000 in compensatory damages. In addition, the defendants also incurred the costs of unsuccessfully defending the plaintiff’s claim.

[29]   The question is whether, assessed standing in the shoes of the parties at the time, the defendants’ refusal of those offers was unreasonable.

[30]   I am satisfied that, by the date of the plaintiff’s letter of 11 August 2016, the defendants should have appreciated that there was little prospect of the pleaded defence of truth succeeding in respect of most of the pleaded imputations. As counsel for the plaintiff noted in that letter, and as I later accepted, many of the defamatory imputations went to the plaintiff’s alleged thoughts and intentions. These are matters the defendant was unable to prove as fact and therefore true. Similarly, as I also accepted, the defence of honest opinion was not available in respect of several of the imputations because the statements from which those imputations arose were expressed as facts. That too should have been apparent to the defendants and their counsel.

[31]   The defence of qualified privilege, on which the defendant also relied, was substantially modified by the Court of Appeal’s decision in Durie v Gardiner, issued

after the hearing but before my judgment had been issued. While the parties could not have known at the time of the settlement negotiations how their positions would have fared when measured against the new defence of public interest privilege established in Durie v Gardiner,16 the law on the defence of qualified privilege as it stood before that decision was considerably less helpful to the defendants’ position than it was after that decision. The plaintiff’s letter of 11 August 2016 put the defendants on notice as to the difficulties the defendants would face in succeeding with that defence. The defendants and their counsel should have been aware of their limited prospects of success with that defence.

[32]   I am satisfied, therefore, that when rejecting the plaintiff’s offers, the defendants ought to have appreciated that their prospects of successfully defending the plaintiff’s claim were poor. To that extent, I accept that their refusal to accept the plaintiff’s offers was unreasonable.

[33]   However, that is not the end of the matter. The settlement offers were not just about money. They also involved statements of apology that the plaintiff wanted the defendants to publish and signed undertakings that the plaintiffs sought to obtain from the defendants.

[34]   The offers of 19 August 2016 and 30 August 2017 sought publication of substantial statements in the four Korean community newspapers. Because English translations of the proposed statements have not been provided with the affidavit filed in support of the plaintiff’s application, I am unable to assess their content and thus the reasonableness of the defendants’ refusal to agree to the proposed statements. It is apparent from the length of the Korean language versions of the statements, however, that they went into some detail. I infer that this detail was in furtherance of the plaintiff’s desire to have his honour restored in the eyes of the New Zealand Korean community. It is not surprising that the defendants may have had some difficulty accepting these proposals.

[35]   By March 2018, it appears that the parties had been able to narrow their differences and had come close to agreeing the language of a statement to be published

16     At [56] and [104].

only in the New Zealand Sunday Times but no agreement could be reached on associated conditions sought by the plaintiff. The condition requiring signed undertakings as set out in the letter of 28 March 2018 from the plaintiff’s counsel was far-reaching and extended beyond the parameters of a defamation action. It is apparent from the letter of 15 March 2018 from the defendant’s solicitors why the defendants would have baulked at such a condition. If accepted, it could have been taken as precluding the defendants’ right to make any comment critical of the plaintiff in relation to major issues of public moment then being discussed in the New Zealand Korean community.

[36]   One of the noteworthy aspects of the dispute, which is acknowledged in the correspondence between their counsel, is that each side was basing its position on “principle” as each saw it. The plaintiff was looking for recognition of the damage to his reputation while the defendants were determined to preserve their “fourth estate” rights. I consider it likely that the defendants would have regarded the condition proposed by the plaintiff as an unacceptable intrusion on their roles as journalist and publisher. For that reason, acceptance of such a condition would have been very difficult for the defendants—as the plaintiff would have appreciated from the letters from the defendants’ solicitors.

[37]    For these reasons, I am not able to conclude that the defendants’ rejection of the Calderbank offers was entirely unreasonable. I accept there was an element of unreasonable stubbornness in the defendants’ refusal to accept the weakness of their legal case. However, that was offset to a substantial degree by the stance of the plaintiff who insisted on a condition that went beyond the parameters of the defamation action and which made the defendants’ acceptance of the plaintiff’s proposed settlement difficult.

[38]   For the above reasons, while I consider some uplift in costs is appropriate, I am not persuaded it should be of the order proposed by the plaintiff. Nor do I accept that there should be any uplift to reflect the position taken by the defendants after judgment had been issued. As held by Asher J in Diagnostic Medlab Ltd v Auckland

District Health Board, costs relate to a proceeding itself and not to events that have occurred as a consequence of orders made in the proceeding.17

Scale Costs

[39]   As directed in my judgment of 30 November 2018, the plaintiff has calculated costs on a 2B basis. These come to $70,022.00.

[40]   The plaintiff submits there should be an uplift of 75 per cent. I consider that to be considerably more than is warranted in the circumstances.

[41]   The Court of Appeal has held that an increase of 50 per cent on scale costs should usually grant the costs-claiming party a fair recovery for a step unnecessarily forced on it, assuming that the time allocated to the step has been reasonably calculated.18 I consider that to be appropriate guidance for an upper limit in a case which does not involve conduct that could be regarded as out of the ordinary between parties and counsel engaged in contentious proceedings.

[42]   I also consider any uplift should take into account that the defendants’ refusal to acknowledge the weakness in their legal case and to accept the plaintiff’s settlement offers was offset by the plaintiff insisting on conditions which the plaintiff would have known the defendants would have found difficult to accept. It is also relevant that the defendants raised successful defences in respect of eight of the pleaded defamatory imputations.

[43]Taking these matters into consideration, I consider an uplift of 15 per cent or

$10,503.30 is appropriate. As a consequence, the costs payable to the plaintiff by the defendants are $80,525.30.

Disbursements

[44]   I am satisfied that the disbursements of $82,926.16 set out in the second schedule of the memorandum of counsel for the plaintiff dated 15 May 2019 are

17     See Diagnostic Medlab Ltd v Auckland District Health Board (No 2) CIV-2006-404-4724, 23 October 2009 at [12].

18     Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [47].

reasonable in amount and reflect costs reasonably incurred in respect of this proceeding. I infer that the “third party costs” of $33,536.56 relate to the costs of interpretation and translation but note that it would have been helpful to the Court to have this made explicit.

Result and Orders

[45]   The first and second defendants are, jointly and severally, to pay the plaintiffs the sum of $163,451.46 comprising:

(a)The plaintiff’s costs of $80,525.30; and

(b)Disbursements of $82,926.16.

G J van Bohemen J