Lee v Lee

[2018] NZHC 991

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-3204

[2018] NZHC 991

BETWEEN

DONKEUN LEE AND ILSOOK KANG

Plaintiffs

AND

HEE HYUN LEE AND MYUNG JUN LEE

as executors of the estate of TECK-KEUN LEE
First Defendants

HEE HYUN LEE AND MYUNG JUN LEE

as executors of the estate of JUNG JA YUN Second Defendants

Hearing:

8 May 2018

Appearances:

T A Hwang for Plaintiffs

A Manuson & E Hong for Defendants

Judgment:

8 May 2018

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 8 May 2018 at 4.30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Queen City Law, Auckland

Prestige Lawyers Limited, Auckland

LEE v LEE [2018] NZHC 991 [8 May 2018]

Background

[1]    DK Lee and TK Lee are respectively the youngest and eldest of four Korean brothers. DK Lee and his wife, Ms Kang, are the plaintiffs. TK Lee and his wife, Ms Yun, are now deceased, but the executors of their estates are respectively the first and second defendants, their daughters.

[2]    TK Lee was a director of a Korean company, Hoseung CMC, of which DK Lee is chief executive. TK Lee also owns a New Zealand company, Hoseung NZ Enterprises Co Limited (“Hoseung NZ”).

[3]    Substantial sums of money have been transferred from South Korea by DK Lee to TK Lee in New Zealand (or at his direction). DK Lee alleges those transfers of nearly $800,000 were consideration for his participation in the subdivision and redevelopment of properties at 354 and 356 Hillsborough Road in Hillsborough, Auckland. Hoseung NZ is said to be the vehicle for the proposed development, to accommodate all four brothers and their families.

[4]    At some time about 2000, the TK Lee and DK Lee families moved to New Zealand. TK Lee and Ms Yun lived at 354 Hillsborough Road. DK Lee and Ms Kang continue to live at 356 Hillsborough Road. It transpires both properties were registered in the name of Ms Yun, with a half share in 354 being transferred to TK Lee in 2010.

[5]    The proposed development did not eventuate. Relationships between the brothers and their respective families deteriorated. In 2015, Ms Yun sought to evict DK Lee and Ms Kang from 356 Hillsborough Road (the consequent Tenancy Tribunal hearing including allegations Ms Yun fabricated the tenancy agreement she relied upon), but that was resolved between the parties.

[6]    In late 2016, DK Lee and Ms Kang brought the present proceeding. In this proceeding, DK Lee and Ms Kang claim the defendants hold 354 and 356 Hillsborough Road as constructive trustees for DK Lee and Ms Kang, and seek relief accordingly.

Application for security for costs

[7]    The defendants apply for security for costs, saying the plaintiffs, if unsuccessful in the proceeding, will not be able to pay the defendants’ costs. They say DK Lee is not resident in New Zealand (but in Korea, where he works), and he and Ms Kang have no assets in New Zealand. DK Lee and Ms Kang respond they should be considered resident in New Zealand, where certainly Ms Kang is presently living, and their present impecuniosity is precisely because of their provision of funds to TK Lee. The defendants respond the net position is TK Lee provided funds to DK Lee’s family, and they have wasted them.

[8]    A plaintiff may be ordered to give security for a defendant’s costs in terms of High Court Rule 5.45, which provides:

5.45   Order for security of costs

(1)Subclause (2) applies if a Judge is satisfied, on the application of a defendant,—

(a)    that a plaintiff—

(i)is resident out of New Zealand; or

(ii)is a corporation incorporated outside New Zealand; or

(iii)is a subsidiary (within the meaning of section 5 of the Companies Act 1993) of a corporation incorporated outside New Zealand; or

(b)    that there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff’s proceeding.

(2)A Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs.

(3)An order under subclause (2)—

(a)    requires the plaintiff or plaintiffs against whom the order is made to give security for costs as directed for a sum that the Judge considers sufficient—

(i)by paying that sum into court; or

(ii)by giving, to the satisfaction of the Judge or the Registrar, security for that sum; and

(b)    may stay the proceeding until the sum is paid or the security given.

(4)A Judge may treat a plaintiff as being resident out of New Zealand even though the plaintiff is temporarily resident in New Zealand.

(5)A Judge may make an order under subclause (2) even if the defendant has taken a step in the proceeding before applying for security.

(6)References in this rule to a plaintiff and defendant are references to the person (however described on the record) who, because of a document filed in the proceeding (for example, a counterclaim), is in the position of plaintiff or defendant.

[9]    In terms of subclause (1), the plaintiffs accept “there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff's proceeding”. The threshold having been crossed, under subclause (2), I may order the giving of security for costs if I think it is just in all the circumstances. It is a highly discretionary consideration, “not to be fettered by constructing ‘principles’ from the facts of previous cases”.1 The Court of Appeal emphasised the overriding consideration is to balance the respective interests of plaintiffs’ access to courts for determination of disputes, and defendants’ protection against unmeritorious litigation.2 Because access to justice is a fundamental human right, I must be slow to make an order for security that will stifle a claim.3 The apparent merits of the claim are a factor to be assessed in conducting the balancing exercise.4

[10]   So far as I can make out at this interlocutory stage, albeit after comprehensive tailored discovery between the parties, there seems a reasonable evidential foundation for the plaintiffs’ allegations. More than a dozen substantial affidavits have been sworn, in both Korean and English. Nothing in any of them is pointed to as denying the payments at the core of the allegations. To the contrary, the defendants’ counsel, Ms Manuson, confirmed over half the payments (in both number and value) were received by the defendants. The existence of the proposed development is supported by evidence from other of the brothers. Whether any payments are founded on that proposal, or have some other basis, justifies trial.

1      A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13].

2      At [15]-[16].

3      Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737 at [3].

4      Ambrose v Pickard [2009] NZCA 502 at [32].

[11]   I see no reason to require the plaintiffs additionally to provide security for the defendants’ costs. Except in exceptional circumstances (of which there is no indication here),5 costs are, after all, only a contribution to the successful party’s legal expenses.6 Given the evidential foundation for the plaintiffs’ claim, and the primacy of access to justice as an “essential human right”,7 it is just the defendants bear the risk they may not be able to collect on any contribution ordered.

Result

[12]The defendants’ application for an order giving security for costs is dismissed.

Costs

[13]   In my preliminary view, costs are better reserved for determination in connection with the substantive result of this proceeding.

[14]   If my preliminary view is not accepted by either party, and costs cannot otherwise be agreed between them, costs are reserved for determination on short memoranda of no more than five pages – annexing a single-page table setting out any contended allowable steps, time allocation, and daily recovery rate – to be filed and served by:

(a)the plaintiffs within ten working days of the date of this judgment;

(b)the defendants within five working days of service of the plaintiffs’ memorandum; and

(c)the plaintiffs strictly in reply within five working days of service of the defendants’ memorandum.

Jagose J

5      HCRs 14.6(1)(b) and 14.6(4).

6      HCR 14.2(1)(d) and (e).

7      Highgate on Broadway Ltd v Devine [2012] NZHC 2288, [2013] NZAR 1017 at [23](b).