Mao v Kim

[2021] NZCA 230

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

 CA682/2020
 [2021] NZCA 230

BETWEEN	JIAWEN MAO Appellant
AND	HYUN BIN KIM First Respondent DUK YOUNG LEE Second Respondent

Counsel:	Appellant in person C E Lewis for Respondents
Judgment: (On the papers)	8 June 2021 at 9.30 am

JUDGMENT OF COLLINS J
(Review of Deputy Registrar’s decision)

AThe application to review the Deputy Registrar’s decision is declined.

BSecurity for costs of $7,060 is payable no later than 24 June 2021.

CThe respondents are entitled to costs for a standard application on a band A basis.

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Introduction

1. Ms Mao applies for a review of a Deputy Registrar’s decision in which the Deputy Registrar declined Ms Mao’s application to dispense with security for costs in an appeal against a High Court costs decision.

Background

1. Ms Mao’s company defaulted on a debt owed to the respondents.

2. The debt was secured over the company’s land and, in due course, the respondents sold the company’s land to repay the debt, but this left a shortfall.

3. The debt was also guaranteed by Ms Mao.  The respondents asked Ms Mao to pay the shortfall, but Ms Mao refused to do so.

4. The respondents then made two applications to recover the shortfall:

   (a)They applied to the District Court for an order that Ms Mao pay the shortfall.  Ms Mao did not file a defence, and the District Court granted the order, but Ms Mao still refused to pay.

   (b)They applied to the High Court for an order that Ms Mao be made bankrupt.  To avoid being made bankrupt, Ms Mao paid the shortfall, and the respondents withdrew their application.[1]

   [1]Kim v Mao HC Auckland CIV-2019-404-1036, 27 October 2020.

5. The respondents then sought to recover their costs from Ms Mao.  They claimed they were entitled to indemnity costs under the terms of Ms Mao’s guarantee and the Insolvency Act 2006.[2]  Ms Mao did not file a defence, and the High Court ordered indemnity costs against her.[3]

   [2]Section 274(1)(b).

   [3]Kim v Mao, above n 1.

6. Ms Mao appeals against the High Court costs decision.[4]

   [4]Ms Mao also applied for recall of the costs decision, which was declined in Kim v Mao HC Auckland CIV-2019-404-1036, 30 October 2020.  Ms Mao also made other claims against the respondents, which were struck out in Mao v Best Capital Ltd [2021] NZHC 735.

7. Ms Mao’s grounds of appeal are that the respondents wrongly put her at risk of being made bankrupt because:

   (a)The respondents paid GST on the sale of the company’s land when they did not need to, and this increased the shortfall she had to pay.

   (b)The respondents put charging orders on her other properties, which caused her personal losses.

8. In this Court, Ms Mao was required to pay security for costs in the sum of $7,060.  She applied for the Deputy Registrar to dispense with this security.  The Deputy Registrar declined her application.  Ms Mao now applies for a review of the Deputy Registrar’s decision.

Principles

1. Under the Court of Appeal (Civil) Rules 2005, r 35(2), the general rule is that an appellant must pay security for costs.

2. However, there are two exceptions:

   (a)Under r 36, an appellant does not need to pay security for costs if they have been granted legal aid.

   (b)Under r 35(6)(c), the Registrar can dispense with security for costs if satisfied that the circumstances warrant it.

3. Rule 35(6)(c) was considered in Reekie v Attorney-General.[5]  The Supreme Court held there are two categories of cases where security for costs should be dispensed with:[6]

   (a)where, if the appellant loses, it is unlikely that a costs order would be made against them;[7] and

   (b)where, if the appellant loses, it is likely that a costs order would be made against them, but it is right to make the respondent defend the appeal without security for costs.

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

   [6]At [19] and [21].  At the time, the second Reekie category only included impecuniosity, but this was later expanded.  See McGuire v New Zealand Law Society [2020] NZCA 271 at [18].

   [7]For a recent example, see Better Public Media Trust v Attorney-General [2020] NZCA 290.

4. The second Reekie category also has two recognised subcategories:

   (a)If the appellant is excused by impecuniosity.[8]  This requires the appellant to show they are impecunious and that a solvent appellant would reasonably pursue the appeal.

   (b)If there is sufficient public interest in the appeal that the appellant should not have to pay security for costs (though if they lost, it is still likely a costs order would be made).[9]

Deputy Registrar’s decision

[8]Reekie v Attorney-General, above n 5, at [35] and [41].

[9]Banks v Ports of Auckland Ltd [2015] NZCA 150, (2015) 22 PRNZ 461; and Siemer v Complete Construction Ltd [2020] NZCA 350. This is a new subcategory that does not require impecuniosity.

1. Ms Mao applied for the Deputy Registrar to dispense with security for costs on the ground that she was excused by impecuniosity.  Ms Mao also said in another memorandum that her appeal had public interest.

2. The Deputy Registrar considered:

   (a)Was Ms Mao excused by impecuniosity?

   (b)Was there sufficient public interest to not require security for costs?

Was Ms Mao excused by impecuniosity?

1. Ms Mao said she was impecunious because she owed $98,407 to the Bank of New Zealand.

2. However, the Deputy Registrar did not think that Ms Mao owing a debt was sufficient proof that she had no funding to pay security for costs.

3. The Deputy Registrar asked Ms Mao for information concerning her assets, liabilities and recourse to other funds.

4. When Ms Mao failed to provide this information, the Deputy Registrar concluded Ms Mao had not established she was impecunious.

5. The Deputy Registrar also thought Ms Mao’s grounds of appeal were misdirected, because they were directed at Ms Mao’s liability for the shortfall rather than the costs decision.  Therefore, the costs decision was unlikely to be overturned.

Was there sufficient public interest to not require security for costs?

1. Ms Mao also claimed the appeal affected other members of the public, such as the property owner and the Bank of New Zealand.

2. However, the Deputy Registrar thought the appeal turned on its particular facts and was unlikely to affect anyone besides the parties.  The Deputy Registrar therefore decided the appeal had no public interest.

Application for review

1. Ms Mao applies for a review of the Deputy Registrar’s decision on the ground that she is excused by impecuniosity.

2. Ms Mao has since provided the following information to support her review:

   (a)her bank statements showing she does not have enough money to pay security for costs; and

   (b)a medical report showing she has symptoms of depression.

3. In my view, Ms Mao has still not provided enough information to establish she is impecunious.  She has still not provided information on:

   (a)her assets and sources of funding;

   (b)the financial circumstances of her relatives;

   (c)whether she has attempted to borrow funding; and

   (d)whether she has attempted to apply for legal aid.

4. The medical report is not relevant to whether she is impecunious.

5. I am also satisfied the appeal is devoid of merit.  The High Court applied standard costs principles when awarding indemnity costs, and Ms Mao has not raised any ground of appeal to challenge this.  Ms Mao’s grounds of appeal challenge her liability for the shortfall, but she should have raised these in the District Court and High Court.

Result

1. The application to review the Deputy Registrar’s decision is declined.

2. Security for costs of $7,060 is payable no later than 24 June 2021.

3. The respondents are entitled to costs for a standard application on a band A basis.

Solicitors:
Hesketh Henry, Auckland for Respondents