MA v Tay
[2012] NZHC 2624
•10 October 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-8215 [2012] NZHC 2624
BETWEEN TIAN MIN (MAGGIE) MA Plaintiff
ANDTONY MENG HIANG TAY First Defendant
ANDSELINA SIAW NYUNG TAY Second Defendant
ANDJIREH HOTEL INVESTMENT LIMITED Third Defendant
ANDTONY TAY TRUST LIMITED AS TRUSTEE FOR THE TONY TAY TRUST Defendant
ANDTONY MEING HIANG TAY AND SELINA NYUNG TAY AND RONALD EDWARD CHERRY AS TRUSTEES OF THE ELSHADAI FAMILY TRUST
Fifth Defendant
ANDROSGO FINANCIAL SERVICES LIMITED
Sixth Defendant
ANDROSHNI GOLIAN Seventh Defendant
Hearing: On Papers
Memoranda of Plaintiff - 31 July 2012 and 7 September 2012
Memorandum of First to Fourth Defendants - 4 September 2012
Judgment: 10 October 2012
Reasons: 10 October 2012
REASONS FOR DECISION OF ASSOCIATE JUDGE D.I. GENDALL
Under r 11.5 of the High Court Rules I direct the Registrar to deliver this Reasons for Decision at 3.00 pm on 10 October 2012.
Solicitors: Ross Holmes, Lawyers, PO Box 33009, Takapuna ([email protected]) Jeffrey Ng, Solicitors, PO Box 36-26, Northcote, North Shore City 0748 ([email protected])
TIAN MIN (MAGGIE) MA V TMH TAY HC AK CIV-2011-404-8215 [10 October 2012]
Introduction
[1] On 4 October 2012 I gave judgment in this proceeding in favour of the plaintiff against the first, second, third and fourth defendants as to costs and disbursements first, with respect to the plaintiff’s successful summary judgment application and secondly, on her successful opposition to an application by the defendants in question to recall that judgment.
[2] The costs awarded to the plaintiff for the summary judgment application itself were calculated on a category 2B basis with a 50% uplift. They totalled
$14,100.00. In addition, an award of disbursements totalling $1,329.90 was made. Those costs and disbursements clearly related only to the summary judgment application.
[3] As to the defendants’ unsuccessful application to recall that judgment, the 4
October 2012 costs judgment on that application awarded an additional $1,128.00 in costs to the plaintiff, the amount sought.
[4] In giving that 4 October 2012 judgment, I indicated that my reasons for the decision would follow. I now set out those reasons.
Background
[5] The plaintiff Tian Min (Maggie) Ma (Ms Ma) and the first defendant, Tony Meng Hiang Tay (Mr Tay) and his associated interests were involved broadly in an arrangement for the purchase, development and establishment of a medical and wellness facility at Lake Karapiro in the Waikato. As part of that process, Mr Tay arranged first, for Ms Ma to purchase one of the units at the Karapiro property and secondly, for bank mortgage finance to be provided to fund part of the purchase.
[6] Settlement of the unit purchase occurred (although surprisingly only the net bank mortgage amount was paid at the time to Mr Tay’s interests as vendors). Thereafter, for a time, mortgage payments were made by a Tay company via rental payments for the unit under an agreed tenancy. Then, as a result of that company stopping the flow of rental money under the tenancy, the mortgage fell into default. As a result, Westpac Bank the mortgagee obtained judgment against the defaulting mortgagor Ms Ma for some $403,034.44 plus interest.
[7] A dispute over the unit and the mortgage default then developed between the parties. A series of meetings to settle that dispute took place. As a result, two agreements were entered into by Mr Tay and his interests to effectively accept liability for the Westpac loan and fully indemnify Ms Ma from the mortgage and the judgment obtained against her by the Westpac Bank.
[8] Subsequently, and for various reasons raised at that time, Mr Tay and his interests claimed that they were not in fact liable under these indemnity agreements. As a result, Ms Ma had little choice but to bring the present summary judgment proceeding to enforce that liability.
[9] This broadly sets out a few of the principal background facts to this proceeding. The full background to the dispute between the parties is long and complex and is set out at paras [8]-[65] of my decision dated 16 May 2012 ((2012
NZHC 990) granting summary judgment.
Costs Application
[10] For the purposes of the present costs determination, it is important to note that the dispute in this proceeding turned largely on the validity of the two indemnity agreements entered into by the first, second, third and fourth defendants. As I have noted above, under these the defendants in question assumed liability for the plaintiff’s indebtedness to the Westpac Bank in respect of the mortgage over the Karapiro unit and the accompanying home loan agreement.
[11] In the plaintiff’s application for summary judgment itself she sought indemnity costs. From the memorandum filed in support of the plaintiff’s costs application, a reasonable level of indemnity costs here is said by the plaintiff to be
$40,000.00. Alternatively, if indemnity costs are refused, an award of increased scale costs is sought.
[12] In this respect, the plaintiff has indicated that costs that would be payable on the summary judgment application on a category 2B basis amount to $10,729.20 and costs on a category 2C basis would total $13,361.20.
[13] The position of the first to fourth defendants in response is a simple one. They acknowledge that costs should be paid to the plaintiff here but say this should be simply on a category 2B basis. They accept that the amount set out in the plaintiff’s memorandum for category 2B costs at $10,729.20 is appropriate.
[14] The issue before the Court therefore is whether indemnity costs in the order of $40,000.00 or alternatively an uplift on scale costs should be awarded here.
Indemnity Costs
[15] Rule 14.6(4) of the High Court Rules deals with indemnity costs and provides:
(4) The court may order a party to pay indemnity costs if—
(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
(b) the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or
(c) costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or
(d) the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or
(e) the party claiming costs is entitled to indemnity costs under a contract or deed; or
(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.
[16] The situations in r 14.6(4)(a)-(b) concern the way in which defendant parties conducted themselves in a proceeding. Indemnity costs will be appropriate whenever a party has behaved either badly or very unreasonably – Bradbury v Westpac Banking Corporation (2009) 3 NZLR 400 at [27].
[17] In Bradbury v Westpac Banking Corporation the Court of Appeal (at [29]) summarised the following circumstances where indemnity costs had been ordered, whilst noting that the list is not exhaustive:
(i)The making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud.
(ii)Particular misconduct causing loss of time to the Court and to other parties.
(iii) Commencing or continuing a proceeding for some ulterior motive.
(iv) Doing so in wilful disregard of known facts or clearly established law. (v) Making allegations which ought never to have been made or unduly
prolonging a case by groundless contentions – essentially the
“hopeless case” situation.
[18] In this case the behaviour of the first, second, third and fourth defendants and in particular Mr Tony Tay in defending the summary judgment proceeding in my view has bordered on being unreasonable but as I see the position, it has not been so unreasonable or vexatious as to entitle the plaintiff to indemnity costs.
[19] A discrete argument on the part of the plaintiff advanced in her memoranda seeking indemnity costs is that recent steps taken by the defendant Mr Tay in issuing new proceedings against the plaintiff entitle her to indemnity costs. In this regard, a statement of claim in those new proceedings dated 26 June 2012 appears to reveal that Mr Tay intends to pursue an action for breach of contract relating to a Joint Venture Agreement between the parties of which he says the earlier 13 October 2011 indemnity agreement formed a part. The defendant Mr Tay (now the plaintiff in the new proceedings) alleges that the Joint Venture Agreement required capital injections through the raising of personal bank loans of the kind Ms Ma entered into with the Westpac Bank. He claims that the plaintiff herself breached the Joint Venture Agreement giving rise to a suggested debt of over $442,000.00.
[20] On this new proceeding, Ms Ma has applied for security for costs and her counsel indicates she will apply to strike-out these proceedings on the grounds that they are an abuse of process, and an attempt to relitigate matters already determined by the decision in the summary judgment application.
[21] The plaintiff Ms Ma contends this new proceeding is relevant to the current costs consideration as Mr Tay and his interests now claim that the 13 October 2011 agreement was intended to be binding and that he entered into it by his own free will,
despite contrary affidavit evidence given for the purposes of the summary judgment application. The plaintiff accordingly submits that making allegations of duress and undue influence in the summary judgment proceeding and then later reneging on those allegations must constitute vexatious and frivolous behaviour on the part of Mr Tay in particular.
[22] On these aspects, I do not consider that evidence of the behaviour of the parties after summary judgment was entered in favour of the plaintiff can be taken into account here. I cannot see its relevance to a costs determination for that earlier summary judgment hearing. What is relevant is the behaviour of the affected defendants leading up to and defending those proceedings. Rule 14.6(4)(a) requires the defendant to have acted vexatiously, frivolously, improperly or unnecessarily in “commencing, continuing or defending a proceeding or a step in a proceeding”. The summary judgment proceedings in respect of which costs are to be awarded were finally disposed of with my judgment of 16 May 2012. Any issue with Mr Tay and the other defendants’ approach to the new proceedings which are yet to be considered will be dealt with in the context of those proceedings.
[23] It follows therefore that the defendants have failed to make out a basis for an award of indemnity costs here.
Increased Costs
[24] The remaining question however is whether any uplift should apply to the scale costs otherwise payable by the defendants here. In this respect, r 14.6(3) deals with the question of an order to pay increased costs and provides:
(3) The court may order a party to pay increased costs if—
(a) the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
(i) failing to comply with these rules or with a direction of the court; or
(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
(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; or
(c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or
(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
[25] It is clear that the party claiming increased costs (here the plaintiff) carries the onus of persuading the Court that their award is justified – Strachan v Denbigh Property Limited HC, Palmerston North, CIV-2010-454-232, 3 June 2011 at [27].
[26] McGechan on Procedure at para HR14.6.02 addresses the threshold required for an award of increased costs to be made and the correct approach to such an award and states:
HR14.6.02 Increased costs
(1A) Threshold
In Bradbury v Westpac Banking Corp [2009] 3 NZLR 400, (2009) 19
PRNZ 385 (CA) at [27] the Court of Appeal stated “increased costs may be ordered where there is failure by the paying party to act reasonably”. The unreasonable conduct must be in relation to the proceeding, and thus after it was commenced, not earlier conduct: Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160]. Further, the court should consider the extent to which the failure to act reasonably contributed to the time or expense of the proceeding. Only to that extent could any percentage uplift from scale be justified: Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400 at [165].
(1) The correct approach
The court uplifts from scale, it is not a question of awarding a percentage of actual costs. In Holdfast New Zealand Ltd v Selleys Pty Ltd (2005) 17
PRNZ 897 (CA) the Court of Appeal provided this guidance on the correct approach to an award of increased costs:
• Step 1: categorise the proceeding under r 14.3.
•Step 2: work out a reasonable time for each step in the proceeding under r 14.5.
• Step 3: as part of the step 2 exercise a party can, under r
14.6(3)(a), apply for extra time for a particular step.
•Step 4: the applicant for costs should step back and look at the costs award it could be entitled to at this point. If it considers it can argue for additional costs under r 14.6(3)(b) it should do so,
but any increase above 50 per cent on the costs produced by steps
1 and 2 is unlikely, given that the daily recovery rate is two-thirds of the daily rate considered reasonable for the particular proceeding.
[27] In this case the plaintiff claims that the defence advanced by the first, second, third and fourth defendants to his summary judgment application was entirely tenuous and unmeritorious for the following reasons:
(a) The first and second defendants had signed the written indemnity agreements acknowledging liability for the Westpac debt and yet notwithstanding this they continued to defend the application itself; and
(b)The argument from the affected defendants that the indemnity agreements were entered into under duress or undue influence was completely lacking in merit and unnecessarily prolonged the proceedings.
I agree. The pursuit by the first, second, third and fourth defendants of what I see as a defence lacking in merit must be seen as a failure on their part to act reasonably here and this clearly justifies an uplift on scale costs in this instance.
[28] The defences purported to be advanced by the first to fourth defendants here did not pose a serious question to be tried with regard to these indemnity agreements and on the facts prevailing had no real prospects of success. I reject the belated suggestion by the defendants that they were entitled to pursue all their defences as the plaintiff was claiming that her entry into the original sale and purchase agreement for the Karapiro unit was not bona fide and that the loan transaction was a fraud upon Westpac. According to the defendants’ position, this meant that they had no choice but to oppose the summary judgment application. Although in this regard I found in my judgment that for summary judgment purposes, fraud with respect to the initial transaction was not able to be made out here, clearly there were a number of question marks which remained over that transaction and which would require full exploration and a testing of the available evidence if this matter had proceeded to trial.
[29] And, in any event, one possibly legitimate ground of defence to the fraud allegation here does not excuse the other separate defences advanced with regard to the indemnity agreements which were entirely without merit. These in my view unnecessarily extended and complicated this proceeding.
[30] As I see it, the failure of the defendants to act reasonably in their endeavours to oppose the summary judgment application have contributed to the time and expense of this proceeding of the summary judgment application to an extent of at least 50%. This reflects the additional resources which would have needed to be spent by the plaintiff in addressing those further defences that lacked any prospect of success.
[31] Under all these circumstances I consider a 50% uplift on category 2B scale costs to be warranted here.
[32] Accordingly, on 4 October 2012 I made the order for the first, second, third and fourth defendants to pay to the plaintiff costs on the plaintiff’s successful summary judgment application on a category 2B basis with a 50% uplift amounting to $14,100.00 together with the disbursements claimed totalling $1,329.90. This is confirmed here.
Costs on the Defendants’ Unsuccessful Application to Recall the Summary
Judgment
[33] As I noted at para [3] above, the plaintiff seeks an additional $1,128.00 costs in opposing the defendants’ unsuccessful application to recall the summary judgment given in this proceeding.
[34] In my view this costs claim is unobjectionable and there does not appear to be any real opposition from the defendants to it.
[35] Accordingly, on 4 October 2012 I gave judgment in favour of the plaintiff against the first, second, third and fourth defendants for $1,128.00 costs on the plaintiff’s successful opposition to the defendants’ application to recall the summary judgment. This is confirmed here.
Costs on the Costs Application Itself
[36] Finally, at para [27] of the costs memorandum filed by counsel for the plaintiff dated 7 September 2012, the plaintiff also sought costs in respect of the present costs application itself. On this, counsel for the plaintiff noted that there is no question that the Court has jurisdiction to make an award of costs of that kind – Parsot v Greig Developments Limited (2008) 18 PRNZ 995 at [23].
[37] Again there appeared to be no real challenge from the first to fourth defendants here to the plaintiff’s entitlement to an order for costs in respect of the costs application itself.
[38] In this regard, two costs memorandum were required. Counsel for the plaintiff suggests that costs be awarded on these on a category 2B basis.
[39] I agree that this is an appropriate case for costs to be awarded in respect of the costs application itself.
[40] Costs are awarded therefore in favour of the plaintiff against the first, second, third and fourth defendants on a category 2B basis with respect to the plaintiff’s application for costs here and the two costs memoranda required.
‘Associate Judge D.I. Gendall’
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