Lung v Liu
[2023] NZHC 669
•29 March 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1720
[2023] NZHC 669
BETWEEN JU-TING LUNG
Plaintiff
AND
YU-CHEN LIU
Defendant
Hearing: On the papers Appearances:
K Sun for the Plaintiff
L Kearns KC and L Wang for the Defendant
Judgment:
29 March 2023
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
[Costs]
This judgment was delivered by me on 29 March 2023 at 4pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors/Counsel:
Capstone Law, Auckland LW Law, Takapuna
LJ Kearns KC, Auckland
LUNG v LIU [2023] NZHC 669 [29 March 2023]
Introduction
[1] In my judgment dated 23 November 2022 I granted the plaintiff’s application to set aside the defendant’s protest to jurisdiction (Judgment).1
[2] I allowed significantly more time than usual for the parties to try to agree costs between themselves as I indicated that although the plaintiff had succeeded in her application, I considered that the plaintiff’s approach may not be the most efficient way to resolve the issues between the parties. On that basis, I indicated that my preliminary view was that costs ought to lie where they fall and asked the parties to confer and only if agreement was not possible to file memoranda.
[3] Unfortunately, agreement has not been reached and memoranda have been filed.
[4] Counsel for the plaintiff submits that as the plaintiff was successful in the application, costs ought to follow the event and that increased costs ought to be awarded on a 2B basis with a 50 per cent uplift. Increased costs are sought as the plaintiff had sent a Calderbank offer prior to the hearing of the application to set aside the protest which the plaintiff submits was more beneficial to the defendant than the final outcome of the application.
[5] The defendant responds that costs ought to lie where they fall, submitting that the plaintiff achieved a pyrrhic victory and that the plaintiff’s “Calderbank offer” was made in response to the defendant’s open offer requesting the plaintiff to withdraw her proceedings in the High Court and to issue relationship property proceedings at the Family Court, which was ultimately the Court’s recommendation to the parties.
Relevant costs principles
[6] Rule 14.1 of the High Court Rules 2016 confirms that “all matters are at the discretion of the court if they relate to costs of a proceeding”. The discretion vested by r 14.1 is wide but must be exercised subject to the general principles in r 14.2. The
1 Lung v Liu [2022] NZHC 3074.
first principle set out in r 14.2(1) is that the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds.
[7]The Court of Appeal has confirmed that:2
Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focussing on who initiated what step, and the extent to which that step succeeded or failed.
[8]The remaining principles in r 14.2(1) are:
(b)an award of costs should reflect the complexity and significance of the proceeding:
(c)costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application:
(d)an appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application:
(e)what is an appropriate daily recovery rate and what is a reasonable time should not depend on the skill or experience of the solicitor or counsel involved or on the time actually spent by the solicitor or counsel involved or on the costs actually incurred by the party claiming costs:
(f)an award of costs should not exceed the costs incurred by the party claiming costs:
(g)so far as possible the determination of costs should be predictable and expeditious.
[9] Rules 14.3 to 14.5 provide for the categorisation of proceedings, the appropriate daily recovery rates and the determination of a reasonable time for each step for the purposes of r 14.2(1)(c) by reference to the time specified for each step in Schedule 3.
[10] Rule 14.7 provides that despite rr 14.2 to 14.5, the court may refuse to make an order for costs or may reduce the costs otherwise payable including where the party claiming costs, although succeeding overall, has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs or where some other reason exists which justifies the court refusing costs or reducing costs
2 Packing In Ltd (in liq) formerly known as Bond Cargo Ltd v Chilcott (2003) 16 PRNZ 869 (CA) at [6]; and see Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Company Ltd [2020] NZHC 932 at [28]-[29].
despite the principle that the determination of costs should be predictable and expeditious.3
[11] Rules 14.10 and 14.11 apply in respect of offers made on a without prejudice except as to costs basis (or a Calderbank offer as referred to by counsel). Rule 14.11(3)(b) provides that a party is entitled to costs on the steps taken in the proceeding after such an offer is made if a party makes an offer that would have been more beneficial to the other party than the judgment obtained.
Discussion
[12] In order to determine whether costs ought to be awarded to the plaintiff it is necessary to realistically appraise the success or otherwise of the plaintiff’s application.4
[13] The plaintiff applied to set aside the respondent’s protest on the following alternative grounds:5
(a)The Property was purchased 8 months after the parties had separated (using funds from the respondent’s separate property). Therefore this is not a transaction under the jurisdiction of the PRA because the parties are no longer spouses.
(b)In the alternative, the parties have waived their rights under the PRA with respect to the Property (i.e the parties agree the Property is not relationship property). Therefore the Family Court does not have jurisdiction to determine its division.
(c)In the alternative, the PRA does not preclude the applicant from seeking orders in the High Court for the sale of the property under the Property Law Act 2007.
[14] At the hearing, a further alternative was added: that orders can, in any event, be made under the Property Law Act 2007 (PLA) with any amount held to be relationship property set aside so proceedings could be brought in the Family Court.
3 Rules 14.7(d) and (g).
4 Packing In Ltd (in liq) formerly known as Bond Cargo Ltd v Chilcott, above n 2.
5 Lung v Liu, above n 1, at [4].
[15]I found against the plaintiff in respect of the first two grounds finding:
(a)that the parties were spouses under s 23(1)(a) of the Property (Relationships) Act 1976 (PRA) so any question relating to relationship property must be decided as if it had been raised in proceedings under the PRA;6 and
(b)that the parties had not waived their rights under the PRA in respect of the Studfall Street property and therefore the Family Court still had jurisdiction to determine its division.7
[16] I found in favour of the plaintiff in respect of the third ground as the plaintiff’s application was not an application under the PRA, and so there was no requirement for it to be heard and determined in the Family Court.8 I did not therefore need to go on to determine the fourth ground, whether orders could be made with any amount held to be relationship property to be set aside to allow proceedings in the Family Court.9
[17] In reaching the view I did on the third ground, I held that the Court would still be required to decide any question in respect of relationship property as if the question had been raised in proceedings under the PRA. I further noted that where an order for sale is sought pursuant to s 339 of the PLA, the Court is required to have regard to the matters specified in s 342 of the PLA. The final consideration in s 342 is “any other matters that the Court considers relevant”. I held that this final consideration allows the Court to consider the unresolved relationship property issues in determining whether a sale order ought to be made even if the Studfall Street property is separate property.10
6 Lung v Liu, above n 1, at [38].
7 At [48].
8 At [71].
9 At [75].
10 At [73] - [74].
[18] I therefore recorded in respect of costs that although the plaintiff had succeeded in her application to set aside the respondent’s protest to jurisdiction, the plaintiff’s approach may not be the most efficient way to resolve the issues between the parties. I referred here particularly to the fact that the plaintiff did not respond to the letter sent by the defendant in relation to resolution of the relationship property issues between them as potentially leading to costs consequences.
[19] In the plaintiff’s memorandum, counsel records that the plaintiff advises that she did in fact correspond with the defendant by messages and emails subsequent to the date of the defendant’s letter of 11 May 2021 but that the parties were not able to reach an agreement to settle the dispute. Counsel for the defendant however records that there is no evidence of such correspondence.
[20] Counsel for the plaintiff further records that the plaintiff genuinely believed that the issues in relation to the Studfall Street property were commercial contract issues because both parties acknowledged that the property was not relationship property and that the applicant issued the proceeding in the High Court in good faith.
[21] Counsel for the defendant attaches two letters to the costs memorandum filed, including a letter dated 19 January 2022 sent following the plaintiff’s filing of the application to set aside the protest to jurisdiction. The letter reiterates the defendant’s position, as set out in the appearance under protest to jurisdiction filed, that the sale order sought in the High Court proceeding relates only to one aspect of a wide range of unresolved relationship property disputes between the parties and that the plaintiff is instead required to issue relationship property proceedings in the Family Court.
[22] Although the plaintiff’s application to set aside the protest was successful, I essentially reached the same conclusion: that the plaintiff’s High Court proceedings in respect of the Studfall Street property related to only one aspect of the parties’ unresolved relationship property dispute and that it would be more efficient for all issues to be properly determined in a relationship property proceeding in the Family Court rather than continuing with the High Court proceeding.
[23] The plaintiff has been legally advised throughout and so I do not consider her view that she had a claim in contract against the defendant takes her very far. From the outset the issues with that claim have been pointed out by the defendant.
[24] Furthermore, the plaintiff finally appears to have accepted that position, agreeing to discontinue the High Court proceedings and to file Family Court proceedings if matters are not able to be resolved between the parties.
[25] In these circumstances I consider that it is in the interests of justice for costs to lie where they fall as otherwise parties may be encouraged to take the approach adopted by the plaintiff in this case, complicating rather than simplifying the process for resolving relationship property disputes.
Calderbank offer
[26] The Calderbank offer relied on by counsel for the plaintiff does not change the position. Counsel submits the plaintiff made the following settlement offer prior to the application to set aside the protest to jurisdiction by letter dated 28 January 2022:11
(a)the [plaintiff] to withdraw the Application;
(b)the [defendant] to withdraw his appearance under protest to jurisdiction;
(c) the parties agree to no issues as to costs with respect to the above. (together, the Offer)
[27] Counsel for the plaintiff says the defendant did not accept the plaintiff’s offer and that the plaintiff’s offer was more beneficial to the defendant than the final outcome of the application so, in accordance with r 14.11(3)(b) of the High Court Rules, the plaintiff ought to be entitled to costs on steps taken after 28 January 2022.
[28] However the plaintiff’s without prejudice offer not only proceeded on the basis that the Family Court did not have jurisdiction over the Studfall Street property (which I held not to be correct) but also required the defendant to immediately withdraw his notice of claim lodged on the plaintiff’s Flatbush School Road property. This casts the offer in a significantly different light than the summary in the plaintiff’s costs
11 Memorandum of counsel for the applicant with respect to costs dated 14 December 2022 at [23].
memorandum. I do not consider it is accurate to say that the position of the defendant would have been better if he had accepted the offer in the plaintiff’s letter of 28 January 2022 rather than following determination of the application to set aside the protest. I do not therefore consider the plaintiff’s Calderbank offer affects the position on costs.
Result
[29] Costs in respect of the application by the plaintiff to set aside the defendant’s protest to jurisdiction are to lie where they fall.
[30] Directions were made in my Minute dated 23 March 2023 in respect of the discontinuance of these proceedings and the filing of proceedings in the Family Court. No further directions are therefore necessary.
Associate Judge Sussock
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