Merchant Finance Limited v Xu

[2022] NZHC 1991

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-1860

[2022] NZHC 1991

BETWEEN

MERCHANT FINANCE LIMITED

Plaintiff

AND

RU XU and KARL EDWARD LITT

Defendants

AND

GDL MORTGAGES LIMITED

First third party

AND

WEIPING GE

Second Third Party

Hearing:

On the papers

Appearances:

DK Wilson for the Plaintiff

CR Goode and D Oh for the Defendants MJW Lenihan for the Third Parties

Judgment:

12 August 2022

JUDGMENT OF FITZGERALD J

[As to costs]

This judgment was delivered by me on 12 August 2022 at 12.00/pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………….

Solicitors:Davenports City Law (G Whiteford), Auckland Loo & Koo (B Lee), Auckland

To:D Wilson, Auckland C Goode, Auckland M Lenihan, Auckland A Kashyap, Auckland

MERCHANT FINANCE LTD v XU [2022] NZHC 1991 [12 August 2022]

Introduction

[1]    The plaintiff (Merchant Finance) advanced a one-year loan to the defendants, secured by the defendants’ property. The defendants were unable to repay or refinance the loan at the end of its term and Merchant Finance eventually sold the property by mortgagee sale in June 2019. It then brought these proceedings seeking recovery from the defendants of the balance due under the loan, after having credited the net sale proceeds from the mortgagee sale. Merchant Finance sought recovery of a shortfall of approximately $548,000.

[2]    In response to Merchant Finance’s claim, the defendants raised a number of affirmative defences and counterclaims. These included that the loan agreement be reopened and the defendants granted relief on the basis of oppression under the Credit Contracts and Consumer Finance Act 2003 (CCCFA); alleged breaches by Merchant Finance of the Fair Trading Act 1986 (FTA); alleged breaches by Merchant Finance of the responsible lender principles under the CCCFA; and alleged breaches by Merchant Finance of its disclosure obligations under the CCCFA.

[3]    The defendants also brought a third party claim against the third parties (which I will refer to collectively in this judgment as Mr Ge), on the basis that if the defendants were liable to Merchant Finance, such losses were recoverable by the defendants from Mr Ge. The defendants claimed that in acting as the mortgage broker on the loan, Mr Ge breached the CCCFA and FTA (these claims brought on the basis that Mr Ge acted as Merchant Finance’s agent), and that he also breached his duty of care to the defendants under the Financial Advisers Act 2008 (FAA).

[4]    In my substantive judgment delivered in December 2021, I dismissed Merchant Finance’s claim on the basis that there had been significant disclosure failures under the CCCFA and in particular, a failure by Merchant Finance to give correct initial disclosure.1 As a result of that failure, and pursuant to s 99 of the CCCFA, Merchant Finance was prohibited from recovering from the defendants the

1      Merchant Finance v Xu [2021] NZHC 3589 [my substantive judgment].

costs of borrowing, being interest and default interest.2 I dismissed the defendants’ other claims against Merchant Finance. I also dismissed the defendants’ claims against Mr Ge, finding that he was not the agent of Merchant Finance for the purpose of the CCCFA and FTA claims, and that he had not breached his obligations under the FAA.

[5]    Rather than being due a shortfall from the defendants, in a second judgment determining quantum, I ordered that Merchant Finance refund to the defendants a sum of approximately $146,000, being the “excess” recovered by it following the mortgagee sale, once interest and default interest were excluded from the amounts remaining due under the loan.3

[6]    This judgment now deals with the costs of the proceeding. The defendants were legally aided and on the basis they were the successful party overall, they seek recovery of costs paid on their behalf by the Legal Services Commissioner (the Commissioner), plus disbursements, in a total amount of $78,750.45.4 Merchant Finance accepts that it is liable to pay the defendants’ costs, though notes that any costs award must not exceed actual costs paid. Counsel for Merchant Finance, Mr Wilson, further submits that the costs recoverable by the defendants from Merchant Finance should be reduced by 50 percent to reflect that, in Merchant Finance’s submission, more than half of the hearing time concerned the defendants’ unsuccessful third party claim against Mr Ge.

[7]Mr Ge seeks recovery of scale costs (and disbursements) of approximately

$58,000 against Merchant Finance directly, or in the alternative, against the defendants despite them being legally aided. Counsel for Mr Ge, Mr Lenihan, notes that Mr Ge was the only wholly successful party in the proceeding and therefore should not be left out of pocket from successfully defending the claims made against him. In response, Merchant Finance submits that it should not be responsible for Mr Ge’s costs, on the basis that the defendants’ claims against Mr Ge were disjunctive from Merchant Finance’s claim against the defendants, and that the defendants could have

2      Though I ruled that Merchant Finance was entitled to pass onto the defendants certain third party costs paid by it, such as broker and real estate fees.

3      Merchant Finance v Xu [2022] NZHC 1111.

4      $64,747 in costs funded by Legal Aid; $9,251.70 in disbursements funded by Legal Aid; and

$4,751.75 in disbursements not funded by Legal Aid.

awaited the outcome of Merchant Finance’s  claim before seeking recovery from    Mr Ge. The defendants say that as they are legally aided, there is no proper basis upon which a costs award in Mr Ge’s favour ought to be made against them.

Costs award in the defendants’ favour against Merchant Finance

[8]    As noted, there is no dispute that a costs award ought to be made in the defendants’ favour against Merchant Finance. That is plainly right, as the defendants were the successful party overall in the proceeding between Merchant Finance and the defendants.

[9]    Had the defendants not been legally aided, scale costs (on a 2B basis) are calculated by the defendants to be around $105,000. Merchant Finance, reasonably in my view, challenges some of the amounts included in the defendants’ scale costs calculation, namely:

(a)$717 claimed for an appearance at a case management conference on 21 April 2020 when that was dealt with on the papers;

(b)$3,585 for inspection of Merchant Finance’s documents, where no or few documents from Merchant Finance’s list were requested;

(c)$1,434 for a “notice to produce” (claimed under step 22);

(d)$7,170 for second counsel’s appearance at the hearing; and

(e)$3,585 for “final submissions” (dated 22 July 2021, and therefore pre- dating my substantive judgment).

[10]   I agree with Merchant Finance that these items should be excluded from the scale costs calculation. In particular, I would not have certified for second counsel in this proceeding. Further, closing submissions are not separately claimable. For the notice to produce, I allow $500. Step 22 is for filing an interlocutory application, which also includes the supporting affidavit.

[11]On this basis, scale costs reduce to around $90,000.

[12]   Had I been awarding scale costs, I would have reduced the defendants’ costs award by a substantial amount, by around 50 percent.5 This is because all of the defendants’ claims were dismissed, other than those relating to disclosure under the CCCFA. Those disclosure claims could have been determined with limited factual evidence,6 by reference to the loan agreement and associated documents themselves, with some, albeit limited, expert evidence and focused legal submissions. Hearing time would have been one or two days only. Instead, wide-ranging factual evidence was required on the oppression, responsible lender and FTA claims (all those claims being unsuccessful, yet adding substantially to the hearing time), and responding to those claims plainly added significantly to Merchant Finance’s costs. Further, the relief I granted the defendants was not actually pleaded or addressed by the defendants (or Merchant Finance), though I was satisfied that it was appropriate to grant relief under s 99 of the CCCFA, an application by the defendants for such relief not being a pre-requisite.7 Finally, the manner in which the defendants’ claims were pleaded and pursued was in parts confused and difficult to follow, and no doubt also contributed unnecessarily to Merchant Finance’s own costs.8

[13]   For completeness, I would not have reduced a scale costs award simply the basis that approximately half of the hearing time related to the defendants’ claims against Mr Ge, as Merchant Finance submits. Most of the factual evidence in relation to those claims would have been necessary in any event in relation to the defendants’ counterclaims against Merchant Finance based on oppression, the responsible lender principles and the FTA. Had the third party claims not been brought, there is no doubt that Mr Ge would have still needed to be a witness at trial, being intimately involved in the dealings between Merchant Finance and the defendants. The factual contest between him and Ms Xu would have remained.

[14]   On the basis of a 50 percent reduction, the scale costs award, excluding disbursements, would have reduced to approximately $45,000. It would not be

5      High Court Rules 2016, r 14.7.

6      As noted at [44] of my substantive judgment.

7 See my substantive judgment at [248].

8      See the observations I made at [7], [9], [16], [32] and [42] of my substantive judgment.

appropriate for a legally aided party to receive more in costs than they would have received had they not been legally aided.9 The defendants’ costs award is accordingly to be capped at $45,000.

[15]   The defendants are prima facie entitled to their disbursements. It is not clear what makes up the amount of $9,251.70 recorded as paid by Legal Aid by way of disbursements, given the  invoices  attached  to  Ms Goode’s  memorandum  dated  16 June 2022 total only $7,316.64 (and noting that these invoices also include some disbursements met by the defendants themselves, and not by Legal Aid). Nevertheless, Legal Aid has approved disbursements in the former amount. The defendants’ approved disbursements paid by Legal Aid are included in the defendants’ costs award, other than:

(a)gown hire (in the sum of $17.25), being inappropriate that an opposing party pay for such a disbursement;

(b)an invoice of Ms Wang for translation services totalling $73.50, which is claimed by way of disbursements paid directly by the defendants;

(c)a translation fee of $700, on the same basis as (b) above; and

(d)Ms Oh’s fee of $552 and a research fee of $320, both of which would ordinarily be covered by legal costs rather than a disbursement for the purposes of r 14.12 (being an expense paid or incurred for the purposes of the proceeding “that would ordinarily be charged for separately from legal professional services in a solicitor’s bill of costs”).

[16]   A total of $7,588.95 will accordingly be included in the defendants’ costs award for Legal Aid funded disbursements.

9      Body Corporate No. 207715 v McNish [2016] NZHC 475 at [4] where Katz J said that “as a general rule, a successful legally aided party is entitled to the full sum of the legal aid grant, provided this is the same or less than the appropriate costs award calculated on a scale basis” (emphasis added).

[17]   Turning to those disbursements claimed by the defendants as paid by themselves:

(a)I exclude the $3,868.25 claimed for Neilsons’ legal fees. While as a matter of principle, legal fees incurred by a self-represented litigant can be claimed as a disbursement10 (effectively for “behind the scenes” advice in relation to proceedings), the advice provided by Neilsons appears   to   pre-date   these   proceedings,   covering   the   period   16 April 2019 to “late 2019”. No underlying invoices from Neilsons have been provided by the defendants in support of their claim for this disbursement. They provide only a summary statement which does not disclose the nature of the advice given. However, the defendants’ costs submissions refer to this advice as relating to “the loan, PLA notices, sale and mortgagee sale”. Advice on these matters pre-dates these proceedings and is accordingly not a disbursement for the purposes of r 14.12(1)(a), not being an “expense paid or incurred for the purpose of the proceeding” (emphasis added), nor “specific to the conduct of the proceeding” (for the purposes of r 14.12(2)(b)).

(b)It is appropriate that the defendants’ costs award include disbursements for the filing fee for the notice of opposition ($110) and translation services ($700 and $73.50).

[18]   Accordingly, together with the Legal Aid disbursements, a total of $8,362.45 is to be included in the defendants’ costs award for all disbursements.

Mr Ge’s claim for costs

[19]   There is no challenge to the quantification of the scale costs award sought by Mr Ge of $58,162.00 (being costs of $48,995 and disbursements of $9,167). The issue in dispute is who should pay any costs award in Mr Ge’s favour, namely Merchant Finance or the defendants.

10     See the discussion in Holt v Demetriades [2021] NZHC 2437 at [25]–[34].

[20]   As a preliminary point, I do not accept the submission made on Mr Ge’s behalf that as he was successful in defending the claims made against him, he should not be left out of pocket for doing so. The default position under s 45(2) of the Legal Services Act 2011 (LSA) is that no costs award may be made against a legally aided person unless the court is satisfied that there are exceptional circumstances. Accordingly, absent exceptional circumstances, a party in Mr Ge’s position (having successfully defended claims brought against it by a legally aided person) will always be “out of pocket” from a costs perspective. In those circumstances, that party may apply to the Commissioner pursuant to s 46(2) of the LSA for payment by the Commissioner of some or all of the difference between the costs (if any) actually awarded to that party against the legally aided party, and the costs to which the first party would have been entitled but for the other party being legally aided. For these reasons, the fact that  Mr Ge might be “out of pocket” because the defendants are legally aided is not a factor that, in and of itself, warrants either Merchant Finance or the defendants paying some or all of his scale costs.

[21]   As mentioned earlier, Mr Ge’s primary submission is that Merchant Finance should pay his scale costs. Mr Lenihan refers in support of this argument to Casey, Annotated High Court Rules, where it is stated that:11

If the plaintiff is unsuccessful it will normally have to pay the third parties’ costs, either directly or as a part of the costs payable to the defendant.

[22]   I note, however, that that commentary goes on to state that “where the causes of action are disjunctive and the claim against the third party could have awaited the outcome of the claim by the plaintiff against the defendant, the defendant may be required to meet the third parties’ costs”.12 This is of course the argument made by Merchant Finance. Similar observations are made by the authors of McGechan on Procedure:13

Normally a defendant who has successfully defended the plaintiff’s claim will be ordered to pay the costs of a third party joined by that defendant. However,

11 Matthew Casey and others Annotated High Court Rules (4th ed, LexisNexis, Wellington, 2018) at [HCR14.1.5].

12 At [HCR14.1.5].

13  Robert Osbourne (ed) McGechan on Procedure  (online ed, Thomson Reuters) at HRPt14.08,  citing Money World New Zealand 2000 Limited v KVB Kunlun New Zealand Limited HC Auckland CIV-2003-404-2542, 23 September 2005; see [23] below.

if the plaintiff’s claim is effectively against a third party, of if that claim had the inevitable result of the third party being joined, then the unsuccessful plaintiff may be ordered to pay the third party’s costs direct. Alternatively, the defendant may be permitted to add the costs which it has been ordered to pay to the third party, to the costs which the plaintiff should pay the defendant. Thus, a successful defendant should only be called on to meet a third party’s costs if the joinder was unnecessary or for some other reason unjustified.

[23]   Mr Lenihan also relies on this Court’s decision in Money World New Zealand 2000 Ltd v KVB Kunlun New Zealand Ltd (Money World v KVB).14 In that case, Money World and KVB had entered into a foreign exchange transaction whereby KVB agreed to exchange the equivalent New Zealand currency for FJD 360,000. Before the transaction was completed, KVB became suspicious about the Fijian $2 notes being provided by Money World and contacted the Reserve Bank of Fiji (the Reserve Bank) to find out if the notes were legal tender. It did not receive a specific answer to its query. KVB then cancelled the transaction with Money World, considering that the Reserve Bank’s reply cast doubt on whether the notes were legal tender. It was later established that the notes were legal tender, but there was a question as to whether the particular notes would be redeemed by the Reserve Bank as the issuing bank. Later on, KVB learned that the notes would be accepted by ANZ in Fiji, but by that time, KVB had incurred costs in relation to the cancelled transaction, the value of the notes had diminished and Money World refused to accept the notes back. Money World issued proceedings against KVB to recover its loss on the original exchange transaction. KVB joined the Reserve Bank alleging that if it was liable to Money World, then this had only arisen because it had been misled by the Reserve Bank. I pause to note that this is similar to the present case, in that the defendants said that if they were liable to Merchant Finance for the shortfall under the loan, this was only because Mr Ge, as mortgage broker, arranged that loan for them, and failed in his duties to the defendants in relation to the loan.

[24]   In Money World v KVB, Laurenson J found that KVB was not liable to Money World and therefore the question of indemnity as between KVB and the Reserve Bank did not have to be finally resolved. Laurenson J observed, however, that had he found in favour of Money World, he would not have found the Reserve Bank liable to KVB.

14     Money World New Zealand 2000 Ltd v KVB Kunlun New Zealand Ltd HC Auckland CIV-2003- 404-2542, 23 September 2005.

[25]   The Judge awarded costs on a 2B basis against Money World on its claim against KVB. The Reserve Bank submitted that it was entitled to its costs against KVB on the basis that costs should follow the event, but noted that it may be just and appropriate for KVB to recover some or all of those costs from Money World in view of the overall outcome of the proceeding. Money World, on the other hand, submitted that it should not bear any responsibility for the Reserve Bank’s costs, given there was no necessity in KVB joining the Reserve Bank.

[26]   Laurenson J noted that in the ordinary course, given KVB had not succeeded in its claim against the Reserve Bank, the Reserve Bank would have been entitled to costs against KVB. Having canvassed a number of relevant authorities, the Judge then stated:

[31]      Having considered these authorities I conclude that in the normal course a successful defendant will have to expect an order for costs in favour of a third party joined by that defendant.

[32]      If, however, the result of the plaintiff’s claim is effectively against a third party or if that claim has the inevitable result of further parties being joined, then there is authority to say that the unsuccessful plaintiff should pay the third party’s costs direct.

[33]      This would seem to imply that a successful defendant should only be called on to meet a third party’s costs if the joinder was unnecessary or for some other reason unjustified.

[27]   The Judge then went on to consider whether KVB had been justified in joining the Reserve Bank. He found that KVB was so justified. The Judge had found that the Reserve Bank’s response to KVB’s query was sufficient to justify cancellation by KVB of its contract with Money World, and sufficient to cast doubt on whether the notes were legal tender. The Judge observed that “KVB was thus left in the position that its basis for cancelling the transaction was dependent on the advice received from [the Reserve Bank]”.15 The Judge concluded that KVB was fully justified in joining the Reserve Bank in order to clarify the position in relation to the legal tender of the notes. Laurenson J noted:

[41]      The sole reason why KVB joined [the Reserve Bank] was because it had been sued by Money World. Having been sued, KVB was entitled to

15 At [38].

protect its position by calling into account, if necessary, the advice of [the Reserve Bank], which it had relied on.

[42]      In my view, it followed that KVB was justified in joining the Reserve Bank. Furthermore, it was inevitable that the Money World claim would provoke that reaction by [KVB].

[28]   Mr Lenihan submits that a similar outcome is appropriate here. He accepts that it was “not unnecessary” for the defendants to join Mr Ge and it plainly made sense for all the allegations to be heard together in the one hearing. Mr Lenihan further submits that Merchant Finance’s conduct in pursuing the shortfall under the loan, given fundamental deficiencies in both the documentation and loan process (both before and after the loan was made), meant that a claim by the defendants against  Mr Ge was all but inevitable.

[29]   Mr Wilson submits that the causes of action by Merchant Finance against the defendants and the defendants against Mr Ge were disjunctive and therefore Merchant Finance should not have to fund the defendants’ unsuccessful claims against Mr Ge. Mr Wilson submits that Merchant Finance was suing for a shortfall on the mortgagee sale and the balance due under a loan contract, while in contrast, the claim against Mr Ge was a broad one, in which it was generally alleged that he breached his statutory duties under the FAA and was negligent. Mr Wilson acknowledges that it was part of the defendants’ case that Mr Ge’s conduct (wrongly) put the defendants into the loan agreement in the first place, but submits that this is not a matter of saying that if the defendants were liable to Merchant Finance, then that was caused by Mr Ge’s breach. Mr Wilson further submits that whether or not the defendants were liable to Merchant Finance under the loan agreement was not related to determination of issues between the defendants and Mr Ge, and thus determination of the claim against Mr Ge would have made no difference to whether the defendants were liable to Merchant Finance.

[30]   I accept the latter proposition, namely that determination of the claim against Mr Ge would not itself have made any difference to whether the defendants were liable to Merchant Finance. In other words, Merchant Finance’s claims against the defendants, and the defendants’ claims against Mr Ge, were disjunctive. However, I am satisfied that this is a case where it would have been inappropriate for the defendants to have awaited the outcome of Merchant Finance’s claim against them

before suing Mr Ge separately (if required). The defendants’ counterclaims against Merchant Finance based on oppression, breach of the responsible lender principles and under the FTA were an almost inevitable response to Merchant Finance’s own claim and overlapped, very considerably, with the defendants’ third party claims against Mr Ge. And while the defendants’ claims against Merchant Finance (other than the disclosure claims under the CCCFA) were unsuccessful, they were not, in the main, hopeless,16 and it was not unreasonable for the defendants to have brought them.

[31]   Merchant Finance’s claim against the defendants accordingly not only inevitably triggered the defendants’ counterclaims against it, but also the very similar third party claims against Mr Ge. In these circumstances, joinder of Mr Ge by the defendants was not unnecessary or unreasonable. The factual evidence relating to the claims of oppression and breach of the responsible lender principles under the CCCFA traversed much of the same evidence that was traversed in relation to the third party claim against Mr Ge.

[32]   For these reasons, I am satisfied that there is a proper basis for a costs award in Mr Ge’s favour against Merchant Finance directly. The next issue is whether that award should cover all of Mr Ge’s scale costs, or only some of them, and whether some should also be met by the defendants.

[33] Given the defendants were only partially successful against Merchant Finance, and indeed failed on those claims which “mirrored” its third party claims against Mr Ge, I do not consider it appropriate for Merchant Finance to bear the entirety of Mr Ge’s costs. Further, and for the same reasons referred to at [12] above, the manner in which the defendants pleaded and pursued their claims undoubtedly significantly increased Mr Ge’s costs and again, I do not consider it appropriate that Merchant Finance contribute to those increased costs which were caused by the defendants. In these circumstances, and while a broad brush approach is all that can be taken, had the defendants not been legally aided, I would have concluded that Merchant Finance should bear one-third of Mr Ge’s costs award, and the defendants two-thirds. On this basis, there will be a costs award against Merchant Finance in favour of Mr Ge for

16     The argument that Mr Ge was Merchant Finance’s agent for the purposes of the CCCFA and the FTA was, however, hopeless.

$19,387.33, being one-third of the (unchallenged) quantum of costs and disbursements claimed by him.

[34]   Should then, the defendants who are legally aided, nevertheless have a costs award made against them for the remaining two-thirds of Mr Ge’s costs award? While I am satisfied that a costs award against the defendants in favour of Mr Ge ought to be made, for the reasons which follow, I do not consider it ought to extend to the full amount of two-thirds of Mr Ge’s costs award.

[35]   As noted earlier, a costs award can only be made against a legally aided person in exceptional circumstances. Section 45(3) of the LSA provides that when determining whether exceptional circumstances exist, the Court may take into account a number of listed factors (though is not limited to those factors), those relevant to this case being:

(a)any conduct that causes the other party (here, Mr Ge) to incur unnecessary cost; and

(b)any unreasonable pursuit of one or more issues on which the aided person (here the defendants) fails.

[36]The Court of Appeal also observed in Laverty v Para Franchising Ltd that:17

We would not, however, confine the issue of exceptional circumstances to cases where the aided party’s conduct of the litigation warranted a mark of disapproval. There may, for example, be case (sic) where the aided party is quite wealthy but significant assets have not excluded a grant of legal aid, perhaps because they are the subject of the dispute or otherwise exempt from calculation. Or possibly the aided party may succeed against one of multiple parties and accordingly be in a position to meet or pass on an award of costs. In other words, the question of whether there are exceptional circumstances needs to be examined on a case by case basis, whether or not those involve disapprobation.

[37]   The Court also stated that for circumstances to qualify as exceptional, they have to be “quite out of the ordinary”.18

17     Laverty v Para Franchising Ltd [2006] 1 NZLR 650 at [24] (emphasis added).

18     At [31], citing Awa v Independent News Auckland Ltd [1996] 2 NZLR 184 (HC) at 186.

[38]   Section 45(1) of the LSA also provides that a legally aided person’s liability under a costs award is not to exceed an amount that is reasonable for the aided person to pay having regard to all the circumstances, including the means of all of the parties and their conduct in connection with the dispute.

[39]   Applying these principles to this case, the defendants have received from Merchant Finance the not insubstantial sum of $146,000. Thus, one of the features noted by the Court of Appeal in Laverty as giving rise to exceptional circumstances is present. The defendants have also been on notice since 28 March 2022 that given receipt of those funds, Mr Ge would seek a costs award against them, despite them being legally aided.19 Mr Lenihan also refers to the costs award the defendants will receive from Merchant Finance, but that will no doubt need to be passed back to the Commissioner. I do not have details of the defendants’ other assets and liabilities, but proceed on the assumption that there are no substantial assets and likely to be liabilities (including to Legal Aid). Indeed, Mr Litt, the second-named defendant, has since the commencement of these proceedings been declared bankrupt, and there is nothing before the Court to suggest that Ms Xu has any substantial assets that for some reason have not prevented a Legal Aid grant.

[40] In addition to the refund from Merchant Finance, I take into account the defendants’ conduct which unnecessarily increased Mr Ge’s costs and any claims that were unreasonably pursued. For the reasons noted at [12] above, I am satisfied that the manner in which the defendants pleaded and pursued their claims also contributes to exceptional circumstances existing, in terms of how that approach unnecessarily extended and complicated these proceedings and increased the other parties’ costs.

[41]   Balancing these factors together, I consider it appropriate that the defendants contribute the sum of $15,000 to Mr Ge’s costs award.

[42]   For the purposes of ss 45 and 46 of the LSA, but for the defendants being legally aided, I would have ordered them to pay two-thirds of Mr Ge’s costs award, being a sum of $38,774.67.

19     Memorandum filed on behalf of Mr Ge, dated 28 March 2022.

Result

[43]I make the following orders:

(a)there is a costs award against Merchant Finance in favour of the defendants in an amount of $45,000,20 plus disbursements of $8,362.45;

(b)there is a costs award against Merchant Finance and in favour of Mr Ge in an amount of $19,387.33, being one-third of Mr Ge’s claim for scale costs and disbursements;

(c)the defendants are to contribute an amount of $15,000 to Mr Ge’s costs award (to be paid to Mr Ge directly); and

(d)for the purposes of s 46 of the LSA, but for the defendants being legally aided, I would have made a costs award against the defendants in favour of Mr Ge of $38,774.67, being two-thirds of Mr Ge’s claim for costs and disbursements.

Fitzgerald J

20     The defendants’ legal aid costs, capped at what I would have otherwise ordered on a scale costs basis; see [14] above.