Lun v Kong

[2025] NZHC 132

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-795

[2025] NZHC 132

BETWEEN

DAMIN LUN

Plaintiff/Counterclaim Defendant

AND

YONGCING KONG

Defendant/Counterclaim Plaintiff

Hearing:

On the papers

Counsel:

J K Goodall KC / L C Sizer for the Plaintiff

R J Hollyman KC / B J Norling for the Defendant

Judgment:

12 February 2025

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 12 February 2025 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:

Buddle Findlay, Auckland,  for the Plaintiff Norling Law Limited, Auckland, for the Defendant

Counsel:
Jason K Goodall KC, Bankside Chambers, Auckland, for the plaintiff

R J Hollyman KC and N G Lawrence, Shortland Chambers, Auckland, for the Defendant

LUN v KONG [2025] NZHC 132 [12 February 2025]

Introduction

[1]    By judgment issued by the Court on 3 October 20241 (the Judgment) the Court:

(a)dismissed the plaintiff’s (Mr Lun) application for strike-out;

(b)dismissed Mr Lun‘s application for summary judgment; and

(c)dismissed the defendant’s (Mr Kong) application for pre-summary judgment discovery.

[2]    Paragraph [69] of the Judgment directed the parties to endeavour to agree costs. The parties have corresponded about costs but have not reached agreement. Accordingly, Mr Norling,2 for Mr Kong, filed a memorandum dated 27 November 2024, and Mr Goodall KC,3 for Mr Lun, filed a memorandum in response dated 4 December 2024.

Mr Kong’s position

[3]    Mr Norling submits that costs should be awarded in favour of Mr Kong because:

(a)Mr  Lun’s  applications  for  summary  judgment   and   strike-out  (the SJ Application) of Mr Kong’s defence and counterclaims failed for reasons which were obvious from an early stage, in particular the need for factual matters to proceed to trial, and should not have been advanced;

1      Lun v Kong [2024] NZHC 2441.

2      The memorandum is filed by Mr Norling and Ms Cherkashina but for convenience I will just refer to Mr Norling.

3      The memorandum is filed by Mr  Goodall and Mr  Sizer but or convenience I will just refer    to Mr Goodall.

(b)the great majority of work preparing for and at the hearings related to Mr Lun’s failed SJ Application; and

(c)Mr Kong’s discovery application (the Discovery Application) was ancillary and only necessitated by Mr Lun’s SJ Application.

Mr Lun’s SJ Application

[4]    Mr Norling submits that Mr Lun’s SJ Application should not have been advanced for the following reasons:

(a)The two applications required the Court to make findings about highly contested issues of fact, which cannot be made at the summary stage of proceedings and it should have been obvious to Mr Lun that this was the case;

(b)the pleadings plainly called into question the legitimacy of the purported “Deed of Settlement” relied upon by Mr Lun as a complete answer to all of the issues at a summary stage;

(c)the correspondence between the parties prior to and following Mr Lun filing his SJ Application made it clear that Mr Kong had credible arguments calling into question Mr Lun’s assertion that the Deed of Settlement was binding;

(d)even if there was any doubt as to the disputed nature of the Deed of Settlement, it was clear when Mr Kong filed his affidavit evidence in support of his opposition to the SJ Application that the applications were bound to fail because there were too many contested disputes of fact;

(e)it is questionable why Mr Lun filed the SJ Application as opposed to summary judgment for his own cause of action which also relied completely on the Deed of Settlement.

[5]    Mr Norling submits that if Mr Lun had a complete` argument as to why the Deed of Settlement was binding, he should have brought it as a summary judgment application at first instance when he first filed a statement of claim, instead of asking for Mr Kong’s defence and counterclaims to be struck out and seeking summary judgment in Mr Lun’s favour.

Mr Kong’s Discovery Application

[6]    Mr Norling submits that Mr Kong’s Discovery Application was only filed because Mr Lun was refusing to provide access to the original Deed of Settlement and other documents, even though he had complete control over all documents relevant to the SJ Application.

[7]    Mr  Norling  submits  the   Discovery  Application   was   ancillary   to   the SJ Application and but for those applications being filed, the Discovery Application would not have been necessary as the parties were proceeding to the discovery stage of the proceedings. He submits that the Discovery Application was also advanced on the basis that it was only required if the Court was minded to grant Mr Lun’s         SJ Application and that the Discovery Application highlighted the lack of disclosure in documents supporting Mr Lun’s SJ Application.

Categorisation of costs

[8]    Mr Norling submits that scale costs should be calculated on a 3C basis. He submits that the complexity and length of the SJ Application, the volume of evidence, the need to translate considerable evidence and search for old records and records overseas, justifies a 3C scale costs allocation.

[9]    Mr Norling also seeks an order for payment of disbursements relating to the expert evidence on “Guanxi” and Chinese law and business dealing customs.

Usual rule of costs to be reserved

[10]   Mr Norling submits that while costs on summary judgment claims are usually reserved if unsuccessful, the present case should be an exception to the normal rule for the reasons that:

(a)Mr Lun’s applications were fundamentally flawed from the beginning;

(b)this was brought to Mr Lun’s attention early in the proceedings;

(c)despite the above, Mr Lun persisted with his applications and in turn forced Mr Kong to go to considerable expense to oppose the claims.

Mr Lun’s position

[11]   Mr Goodall submits that recognising the mixed successes and the nature of the applications, Mr Lun seeks orders that:

(a)the costs and disbursements for the  Discovery Application and the   SJ Application should be reserved until determination of the issues at trial; or

(b)alternatively, if the Court is minded to make a costs award in respect of these applications, that each party is awarded scale 2B costs for the application they succeeded on, and that these costs awards are set-off so that Mr Kong’s total costs award is his costs less Mr Lun’s costs on the Discovery Application plus disbursements.

[12]   Mr Goodall submits the standard approach is for costs to be reserved where the plaintiff is unsuccessful on a summary judgment application, relying on NZI Bank Ltd v Philpott.4 He submits that only in exceptional cases Philpott will not apply, and these exceptional cases are generally those that amount to an abuse of the process of the Court.

4      NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA).

[13]   In relation to disbursements claimed by Mr Kong, Mr Goodall refers to the decision in Tandem Group Ltd v ASB Bank Ltd5 where the Court confirmed that disbursements for expert witness fees incurred to defend a summary judgment application can also be deferred until the outcome of the substantive hearing. He submits this is particularly so where the expert evidence is likely to form a cornerstone of evidence at the trial, which will be the case in the present instance.

The Discovery Application

[14]   Mr Goodall submits that Mr Lun was the successful party in relation to the Discovery Application and as such is entitled to recover his scale 2B costs together with reasonable disbursements. He submits that while the Discovery Application became “otiose” at the hearing that followed from the very nature of the application and it was not withdrawn by Mr Kong, and Mr Lun was required to take significant steps in its opposition.

SJ Application – costs should be reserved

[15]   Mr Goodall submits that while Mr Kong was ultimately successful in relation to the SJ Application, Mr Lun’s position is that the Philpott approach should apply and any award of costs and disbursements should be reserved until final determination of the proceeding.

[16]Mr Goodall submits:

(a)the SJ Application was not unreasonable and was brought against what were serious allegations of fraud. Mr Lun considered that he had a clear and incontrovertible answer to Mr Kong’s counterclaims and Mr Kong never denied that the Deed of Settlement, if valid, would preclude his claim. He submits Mr Kong’s evidence filed in the proceeding was inherently contradictory, unreliable and was not supported by any contemporaneous documents;

5      Tandem Group Ltd v ASB Bank Ltd [2021] NZHC 1135.

(b)the Court noted in its judgment there was “extensive evidence as to the legitimacy of the Settlement Deed” and while the Court ultimately determined that there were sufficient issues relating to the circumstances in which the Deed of Settlement was signed to warrant a trial, it did not find that the application would have certainly failed, or was otherwise improperly brought, nor was the Judgment an endorsement of Mr Kong’s case;

(c)the SJ Application clarified the issues and Mr Kong’s defences in respect of the Deed of Settlement and therefore had the same potential benefits, and inherent appropriateness, as a regular plaintiff’s summary judgment;

(d)Mr Lun did not seek summary judgment on his claim because the pleaded trust obligations arose under the Deed of Settlement and under earlier conversations which created the risk of material conflicting evidence. The same risks did not arise in respect of the SJ Application.

Expert evidence expenses

[17]   Mr Goodall submits that Mr Kong’s expert affidavits will be inevitably deployed at trial, at which point the merits of the positions in them will be properly tested. The costs of preparing the evidence for trial should not be ordered prior to the substantive determination as the evidence might ultimately be rejected by the Court. Accordingly, Mr Kong’s disbursements for expert witness fees should be left for consideration after the trial.

Claim for 3C costs

[18]   Mr Goodall submits that Mr Kong’s claim that costs should be assessed on a 3C basis is unreasonable. He submits:

(a)The proceeding was categorised as being category 2 by the Court on 21 August 2023.6 Mr Kong’s counterclaims have not materially affected the categorisation or warranted any re-categorisation.

(b)band C is unwarranted, particularly in respect of the timetabling of the memorandum for which an entire day is claimed. In the timetabling memorandum Mr Kong sought to have the Discovery Application heard before the S J Application. Mr Kong was unsuccessful in that step (and the associated conference) and accordingly items 11 and 12 should be excluded from his claims for costs;

(c)the claim that Mr Lun filed eight affidavits in relation to the strike- out/summary judgment application prior to the hearing is not correct, for the reasons he sets out in his submission.

Result

[19]   I am of the view that the parties should each be awarded 2B costs in respect of the applications for which they were successful. In relation to Mr Lun’s unsuccessful SJ Application, in my view the usual position of reserving costs on an unsuccessful summary judgment is displaced by the somewhat unusual circumstances that the SJ Application was to strike out or obtain summary judgment in favour of Mr Lun in respect of Mr Kong’s defences and counterclaims, rather than a summary judgment on Mr Lun’s own cause of action.

[20]   In relation to the Discovery Application, it was for discovery prior to the summary judgment hearing, which, while discovery orders can be made prior to a summary judgment hearing, it is relatively unusual.

[21]   I do not accept Mr Norling’s submission that costs should be assessed on a 3C basis. The proceeding was categorised as category 2 in August 2023 and in my view the SJ Application did not justify any change to the category 2 level of complexity.

6      Lun v Kong [2023] NZHC 2256 at [6] (21 August 2023).

[22]   I have allowed items 11 and 12 in Mr Kong’s  costs claim in relation to the  SJ Application but assessed on a 2B basis (0.2 days for each).

[23]   I accept Mr Goodall’s submission that Mr Kong’s expert evidence expenses should be deferred to the trial when the expert evidence will be tested and accepted or not by the Court.

Orders

[24]I make the following orders:

(a)Mr Lun is to pay costs of $9,560 plus disbursements of $110.00, totalling $9,670.00;

(b)Mr Kong is to pay costs of $7,648.00 plus disbursements of $110.00, totalling $7,758.00;

(c)the respective cost orders may be set off with Mr Lun paying the net amount to Mr Kong.

…………………………….. Associate Judge Taylor