Ngui v Ngui

[2020] NZHC 1378

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2018-404-001970

[2020] NZHC 1378

UNDER

The Property Law Act 2007

BETWEEN

MERLISA SHIOW CHING NGUI

First Plaintiff

AND

MERLYNDA SHIOW MIN NGUI

Second Plaintiff

AND

MERLYNA SHIOW SZE NGUI

Third Plaintiff

AND

JOSEPH SHIOW SEN NGUI

Defendant

Hearing:	On the papers
Counsel:	A Gilchrist for the Plaintiffs J A Wickes for the Defendant
Judgment:	18 June 2020

JUDGMENT OF VAN BOHEMEN J

[as to costs]

This judgment was delivered by me on 18 June 2020 at 1.00pm Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

Solicitors/Counsel:

Vlatkovich & McGowan, Auckland Southern Cross Chambers, Auckland Loo & Koo, Auckland

NGUI v NGUI [as to costs] [2020] NZHC 1378 [18 June 2020]

Introduction

[1]    On 13 March 2020 I gave judgment1 in favour of the plaintiffs, Merlisa, Merlynda and Merlyna Ngui, in their dispute with the defendant, their brother Joseph Ngui, over the former family home in Herd Road, Hillsborough, Auckland, which their mother had left to all four children but which the defendant and his family had continued to occupy. As sought by the plaintiffs, I ordered that the property be sold and the proceeds shared equally among the four siblings unless the defendant purchased the plaintiffs’ 25 per cent shares on terms set out in my orders. I also ordered that, at settlement, the defendant pay each plaintiff $37,994.64 for rental from May 2016 to 17 February 2020, less $16,744.02 for each plaintiff’s share of the costs of repair and maintenance, insurance and rates and an additional amount to be quantified upon production of receipts for payment of rates, that had been paid by the defendant. I also made orders regarding the defendant’s responsibility for rent from 18 February 2020.

[2]    As the plaintiffs were the successful parties, I said they were entitled to costs on a 2B basis and that if the parties could not agree on costs they could file submissions with the Court.2

[3]    Mr Gilchrist, counsel for the plaintiffs, filed memoranda on 9 and 23 March 2020. Ms Wickes, counsel for the defendant, filed a memorandum on 23 March 2020. For reasons relating to the Covid-19 emergency, the memoranda were not brought to my attention until 25 May 2020, on which date I had just commenced as period of medical leave. I apologise to counsel and the parties for the delay in responding to counsels’ memoranda.

[4]    The memoranda record that the parties have agreed on the calculation of costs for a hearing of 1.5 days on a 2B basis, being $32,275.00, plus disbursements of

$10,649.00, as set out in the schedule to Mr Gilchrist’s memorandum of 23 March 2020.

1      Ngui v Ngui [2020] NZHC 160.

2 At [97].

[5]    However, Mr Gilchrist submits that this is appropriate case for the Court to order increased or indemnity costs against the defendant and submits that the plaintiffs should be awarded costs of $50,000.00 plus the disbursements agreed with the defendant.

[6]    Mr Gilchrist says that, to the extent necessary, the plaintiffs seek the recall of my judgment to allow them to make such an application. He notes that in the final paragraph of his closing submissions he submitted that this was an appropriate case for memoranda on costs and disbursements to be filed after my judgment had been released.

[7]    Mr Gilchrist submits that increased or indemnity costs are warranted in accordance with rr 14.6(3) and 14.10 of the High Court Rules 2016 because:

(a)The defendant contributed unnecessarily to the expense of the proceeding by taking positions that were untenable and which amounted to pursuing an unnecessary step or an argument that lacked merit and failing to accept a legal argument; and

(b)The defendant unreasonably rejected the plaintiffs’ offers to resolve the proceeding without the parties incurring additional costs, and all of the offers were more beneficial to the defendant than the result directed in my judgment.

[8]    In support of this second ground, which is the primary focus of his submissions, Mr Gilchrist describes and provides copies of offers made by the plaintiffs to the defendants on a without prejudice save as to costs basis to settle the dispute before the hearing.

[9]    Ms Wickes says the defendant opposes increased or indemnity costs and submits that costs have already been awarded. In addition, Ms Wickes says the defendant also made without prejudice offers to the plaintiffs and provides copies of relevant correspondence which, she says, shows the defendant did engage with the plaintiffs in attempting to resolve the issues.

Have costs already been awarded?

[10]At paragraph [97] of my reissued judgment, I stated:

The sisters are entitled to costs on a 2B basis. If the parties cannot agree costs, the sisters may apply by memorandum of no more than four pages filed and served no later than 16 March 2020. Joseph may reply by memorandum of no more than four pages filed and served no later than 30 March 2019.

[11]   That paragraph does not determine costs and does not preclude the plaintiffs seeking an uplift of costs calculated on a 2B basis.  Accordingly,  I do not accept   Ms Wickes’ submission that costs have already been awarded. Nor is it necessary to recall my judgment in order to consider the plaintiffs’ application.

The High Court Rules

[12]Rule 14.6(3) provides:

14.6     Increased costs and indemnity costs

(3)The court may order a party to pay increased costs if—

(a)       […]

(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i)…

(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)…

(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; […]

[13]   Rules 14.10 and 14.11 provide that Calderbank offers may be brought to the attention of the Court and taken into consideration in an award of costs as follows:

14.10Written offers without prejudice except as to costs

(1)A party to a proceeding may make a written offer to another party at any time that—

(a)is expressly stated to be without prejudice except as to costs; and

(b)relates to an issue in the proceeding.

(2)The fact that the offer has been made must not be communicated to the court until the question of costs is to be decided.

14.11Effect on costs

(1)The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.

(2)Subclauses (3) and (4)—

(a)are subject to subclause (1); and

(b)do not limit rule 14.6 or 14.7; and

(c)apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).

(3)Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A—

(a)offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or

(b)makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.

(4)The offer may be taken into account, if party A makes an offer that—

(a)does not fall within paragraph (a) or (b) of subclause (3); and

(b)is close to the value or benefit of the judgment obtained by party B.

[14]   The reasonableness of a party’s rejection of a settlement offer must be assessed at the time it was rejected, having regard to the size and timing of the offer, the reasonable expectations of the offeror at the time, and the parties’ abilities to assess

the merits of the case.3 Ultimately, however, the effect of a r 14.10 offer on costs is at the Court’s discretion.4

Did the defendant contribute unnecessarily to the cost of the proceeding?

[15]   Mr Gilchrist submits that the plaintiffs were always likely to succeed in the proceeding and that the defendant’s position of insisting on retaining possession of the property while refusing to pay any capital or income to his sisters and wishing to delay matters until a time that suited him was always untenable and amounted to pursuing an unnecessary step or argument, one that lacked merit, or failing to accept a legal argument.

[16]   Ms Wickes does not address this aspect of the plaintiffs’ claim in her memorandum.

[17]   I agree that the plaintiffs’ legal position was stronger than the defendant’s and was more likely to be successful. However, the defendant’s position was not hopeless. The plaintiffs accepted that their parents had told Joseph he could develop the back land on the property and could build a house there if he wished. The key issues for determination were the legal consequences of that offer or promise, which had also been made to the other siblings, whether it had been acted on and whether it had been superseded by their mother’s will that left the property to all four children. While the defendant’s position on these issues was not strong, it was not untenable.

[18]   As for the defendant’s retention of possession, he had been the only one of the siblings who had resided continuously in the property and none of the siblings had paid rent to their parents while they were living there. The defendant had also met the costs of repair and maintenance of the property, even if he had an inflated view of the costs in which he claimed the plaintiffs should share. As a consequence, each set of parties believed the other should account to it. The defendant’s position on these matters and on timing, which related to his wish to sort out the property issues in

3      High Court Rules 2016, r 14.6 and 14.11; Detection Services Ltd v Pickering [2019] NZHC 638 at [33], citing New Zealand Sports Merchandising Ltd v DSL Logistics Ltd HC Auckland CIV- 2009-404-5548, 19 August 2010; Samson v Mourant [2016] NZHC 1119 at [44], citing Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].

4      Rule 14.11(1).

Malaysia, might have been lacking in insight and self-focused. However, I do not consider it amounted to pursuing an unnecessary step or argument, or an argument that lacked merit or failing to accept a legal argument.

The Calderbank offers

[19]   Between November 2018 and October 2019, approximately a month before the plaintiffs’ briefs of evidence were to be filed and served, the plaintiffs made four offers to the defendants by letters dated 12 November 2018, 11 July 2019, 3 October 2019 and 11 October 2019 from Mr Gilchrist to Ms Wickes.

[20]   Each letter was labelled “WITHOUT PREJUDICE SAVE AS TO COSTS”. Under each offer, the plaintiffs proposed that the parties would bear their own costs and the plaintiffs would forego any claim for mesne profits based on the defendant’s occupation of the home in the periods before the offers were made.

[21]In summary, the offers were as follows:

(a)Mr Gilchrist’s letter of 12 November 2018, which was made following receipt of the defendant’s notice of opposition to the plaintiffs’ then application for summary judgment and the defendant’s affidavit in support, put forward two options under which each of the siblings would receive one quarter of the value of the property, either by:

(i)Putting the property on the market for sale; or

(ii)Allowing the defendant a period of time to purchase the plaintiffs’ shares in the property at an agreed valuation.

This offer was open for acceptance until 27 November 2018; i.e. 11 working days.

(b)Mr Gilchrist’s letter of 11 July 2019, which was made well in advance of preparation of the plaintiffs’ briefs of evidence, also put forward two

options under which each of the siblings would receive one quarter of the value of the property, either by:

(i)Sale of the property unless the defendant agreed to buy out the plaintiffs’ shares on the basis of an agreed valuation; or

(ii)Deferred sale of the property under which the defendant would remain in occupation of the property until 30 September 2020, at which point the same process envisaged under the first option would apply but from 1 August 2019 the defendant would pay the plaintiffs $525.00 per week by way of rental, which was said to be 75 per cent of the market rental of $700.00 per week.

This offer was open for acceptance for 10 working days; i.e until     25 July 2019.

(c)Mr Gilchrist’s letter of 3 October 2019, which was made just prior to preparation of the plaintiffs’ briefs of evidence, put forward what was termed the plaintiffs’ “final offer”. Under this offer:

(i)The property would be put on the market for immediate sale, with all costs shared equally among the four siblings;

(ii)If settlement had not taken place by 31 December 2019, from 1 January 2020 the defendant would pay rental of $480.00 per (to be shared equally among the plaintiffs) until settlement or until 31 March 2020;

(iii)If  settlement  had  not  taken place by 31 March  2020, from  1 April 2020 the rental would be increased to market rate until settlement.

This offer was open for acceptance until 10 October 2019; i.e. five working days.

(d)Mr Gilchrist’s letter of 11 October 2019, which was written in response to a letter of 10 October 2019 from Ms Wickes and was made after preparation of the plaintiffs’ briefs of evidence had commenced, extended and varied the offer in the letter of 3 October 2019 by allowing until 31 December 2019 for agreement to be reached on a sale and until 29 February 2020 for settlement. Under this offer, if agreement for sale was reached after 31 December 2019 or settlement occurred after 29 February 2020, the defendant would pay rental of $480.00 per week until 31 March 2020, after which rent would be at market rate.

This offer was open for acceptance until 14 October 2019, i.e. three days including a weekend.

[22]   None of the offers was accepted by the defendant, although the defendant did, on occasion, engage with the content of the offers. That engagement did not lead to agreement. In summary:

(a)There  is  no  evidence  of  a  response  to  Mr  Gilchrist’s  letter  of  12 November 2018;

(b)After the period of acceptance in Mr Gilchrist’s letter of 11 July 2019 had expired, Ms Wickes sent Mr Gilchrist a letter dated 1 August 2019 in which she said the defendant was “interested in pursuing” the first option of a sale and would “now move to obtain a registered valuation.” However, the letter said the defendant was concerned at the length of the proposed settlement period because it might take longer for him to receive funds he expected to receive from Malaysia from the sale of his property there to Merlyna.

(c)On 27 August 2019, Ms Wickes sent a further letter to Mr Gilchrist in which she said the defendant was “keen” to buy the property, was negotiating with his sister over the property in Malaysia and was “now obtaining a valuation” of the Herd Road property. The letter went on to say that if the sale of the Malaysian property fell through, the

defendant was “prepared to go with option 2” but at a rental of $480.00 per week. The letter noted that the defendant had and would continue to meet maintenance, rates and insurance outgoings and said the valuation would be forwarded upon receipt.

(d)In a letter dated 3 September 2019 to Ms Wickes, Mr Gilchrist stated that Ms Wickes’ letter was not an acceptance of settlement option two and was also dependent on the sale of the property in Malaysia. He said he had been advised that Merlyna was not in a position to purchase the Malaysian property but said the plaintiffs might be prepared to settle on the basis the Herd Road property was sold and the proceeds divided equally among the four siblings.

(e)In a letter dated 25 September 2019 to Mr Gilchrist, Ms Wickes noted that the defendant and one of the plaintiffs had listed the property for sale but added that the defendant wanted to be compensated for the costs of renovation and maintenance he had put into the house and also wanted the settlement to take account of his share of the mother’s bank account in Malaysia.

(f)In a letter to Mr Gilchrist dated 2 October 2019 and labelled “WITHOUT PREJUDICE EXCEPT AS TO COSTS”, Ms Wickes proposed that the Herd Road property be sold “forthwith” and that from the proceeds of sale the defendant would receive $101,499 for the costs of renovation and improvement of the property, $8,545.43 for an air ticket to Malaysia to resolve problems with the title to the property there, and $10,476.10 for legal costs to date on the basis that the plaintiffs had refused mediation. The net proceeds after these deductions would be divided four ways. The letter also stated that the defendant was prepared to pay only $3,000.00 for rent.

It appears this letter and Mr Gilchrist’s letter of 3 October 2019 were prepared at much the same time and neither letter refers to the other.

(g)In a letter to Mr Gilchrist dated 10 October 2019 and labelled “WITHOUT PREJUDICE EXCEPT AS TO COSTS”, Ms Wickes responded to Mr Gilchrist’s letter of 3 October 2019 and said the defendant was “happy to put the house on the market once he has finished tidying it up.” The letter said there needed to be a condition of sale that settlement was three months after the agreement became unconditional to enable the defendant to relocate and that the defendant was happy to pay rent of $3,000.00 only and that his claim for costs in his letter of 2 October 2019 was “non-negotiable”.

(h)Mr Gilchrist’s letter of 11 October 2019 noted that the offer in his letter of 3 October had been rejected and that Ms Wickes’ letter of 10 October 2019 amounted to a counter-offer. Mr Gilchrist then took issue with a number of aspects of that counter offer, including the defendant’s exclusive use of the property since their mother’s death, the claim for over $100,000.00 for maintenance which was described as “unrealistic”, the costs of the air ticket to Malaysia and the false claim that it was the plaintiffs who had refused mediation. Mr Gilchrist recorded that the matter would not settle on the basis of Ms Wickes’ letters of 2 and 10 October 2019. He then put forward the plaintiffs’ offer as summarised at [21(d)] above.

That was the end of the correspondence as far as the Court is aware.

Discussion

[23]The exchange of correspondence does not reflect well on the defendant.

[24]   On one side, the plaintiffs, though Mr Gilchrist, put forward four serious offers which contained realistic bases for settlement. They each envisaged a four-way division of the value of the property, whether by sale or purchase by the defendant of the plaintiffs’ shares, that had been left to the four of them by their mother. They each offered the defendant a considerable concession in not seeking recovery of rental for the period he had occupied the property exclusively after their mother’s death up until the settlements proposed in the offers.  The last two offers also contained periods of

concessional rental if the defendant opted for deferred settlement, and even used the rate proposed by the defendant in Ms Wickes’ letter of 27 August 2019.

[25]   On the other side, the defendant did not engage seriously with the plaintiffs’ first two offers and sought to insist on unrealistic conditions in relation to the later offers.

[26]   It appears there was no response to Mr Gilchrist’s letter of 12 November 2018. Ms Wickes’ letter of 1 August 2019 constituted  neither acceptance of the offer in  Mr Gilchrist’s letter of 11 July 2019 nor a counter offer and did not adequately address the content of Mr Gilchrist’s letter. Ms Wickes’ letter of 27 August 2019 was in similar vein  and  received  an  appropriate  response  from  Mr Gilchrist  in  his  letter  of    3 September 2019. Ms Wickes’ letter of 25 September 2019 continued the theme of the earlier letters – expressing an interest on the part of the defendant in cooperating in the sale of the property but then referred to conditions that the defendant ought to have known would be unacceptable to the plaintiffs and would preclude agreement. Like the letter of 1 August 2019, the letter of 25 September 2019 was neither an acceptance of the offer of 11 July 2019 nor a counter offer.

[27]   Ms Wickes’ letter of 2 October 2019 contained a concrete offer by the defendant but this was conditioned with the inflated claim for costs of renovation and improvement, the cost of the air ticket to Malaysia, the claim for legal costs premised on the erroneous proposition that it was the plaintiffs who had rejected mediation, and the demand that the defendant pay no more than $3,000.00 for rental. The demand for payment of the air ticket and legal costs were not maintained in Ms Wickes’ letter of 10 October 2019 but the demand for rental of $3,000.00 was continued and the demand for over $100,000.00 for costs of renovation and maintenance was termed “not- negotiable”. Curiously, after proposing in the offer of 2 October 2019 that the property be sold “forthwith”, the letter of 10 October 2019 sought to delay putting the house on the market and to delay settlement. It is unsurprising that the counter offer in this letter was rejected by the plaintiffs in Mr Gilchrist’s letter of 11 October 2019.

[28]   Having regard to r 14.11(3)(b) of the High Court Rules, it is clear that each of the offers made by the plaintiffs in Mr Gilchrist’s letters of 12 November 2018,

11 July 2019, 3 October 2019 and 11 October 2019 were more beneficial to the defendant  than the judgment obtained by the plaintiffs against  the defendant,  as  Ms Wickes acknowledges in her memorandum.

[29]   In particular, in each of the offers the plaintiffs offered to forego mesne profits/rent relating to Joseph’s occupation of the house up to settlement of any sale of the property or settlement of defendant’s purchase of the property except in a case where the defendant failed to settle or chose deferred settlement. If the defendant opted for deferred settlement, the letter of 11 July 2019 proposed rental at commercial rates ($525.00 per week being 75 per cent of the market rental calculated at $700.00 per week), while the letters of 3 and 11 October 2019 offered periods of concessional rental at $480.00 per week at the rate proposed by the defendant.

[30]   By contrast, in my judgment I found that the defendant was liable to each of the plaintiffs for rental of $37,994.64 (or $113,984.52 in total) based on the following calculation of rental:5

(a)       2016: 35 weeks @ $725 per week:  $25,375.00

(b)      2017: full year @ $750 per week:  $39,107.14

(c)       2018: full year @ $775 per week:  $40,410.71

(d)      2019: full year @ 800 per week:  $41,714.28 (e) 2020: 6 weeks and 5 days @ $800 per week:   $5,371.43

$151,978.56

[31]   While those costs were offset by the costs I ordered the plaintiffs to pay the defendant for repair and maintenance, insurance and rates, and while not all of the latter costs had been quantified at the time of judgment, it is clear that the balance lies significantly in the plaintiffs’ favour. That confirms that the offers were reasonable realistic and were genuinely directed towards a resolution of the dispute. By contrast, the responses made by the defendant to the offers and the defendant’s offers in

5 At [85].

Ms Wickes’ letters of 2 and 10 October 2019 were not reasonable or realistic and offered  little  prospect   of  settlement.    In  that  regard,  and  taking  into  account   r 14.6(3)(b)(v) of the High Court Rules, I am satisfied that the defendant’s failure to accept all of the offers put forward by the plaintiffs was without reasonable justification.

[32]   In addition to the cost differential between what was offered and what was achieved, it is also relevant to take into account the timing of the offers, all of which were made at points where settlement of the litigation would have saved all the parties considerable costs.

[33]   For all these reasons, I agree with Mr Gilchrist that an uplift on scale costs is appropriate and consistent with rr 14.10 and 14.11 of the High Court Rules. It is also consistent with the Court of Appeal’s decision in Bradbury v Westpac Banking Corporation, where the Court held that increased costs may be ordered where there is failure by the paying party to act reasonably.6

[34]Mr Gilchrist proposes an uplift from the scale calculation of $32,275.00 to

$50,000.00. This is an increase of approximately 40 per cent on scale costs. An uplift of that order is in line with the guidance of the Court of Appeal in Holdfast NZ Ltd v Selleys Pty Ltd where the Court said that that an increase of 50 percent on scale costs should grant a costs-claiming party a fair recovery where the costs-paying party has behaved unreasonably. 7

[35]While that means the plaintiffs will recover 84 percent of their actual costs of

$59,294.00, that reflects the efficiency and cost-effectiveness of Mr Gilchrist’s advocacy and is not a reason not to grant the full uplift sought.

[36]   Disbursements are not at issue. I accept the parties’ agreement on disbursements as calculated in the plaintiffs’ costs index, including the plaintiffs’ entitlement to be reimbursed for payment of the additional half day of hearing initially scheduled.

6      Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

7      Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [47]–[48].

Result and orders

[37]   For all the above reasons, I grant the plaintiffs’ application for an order for increased costs and order that the defendant pay the plaintiffs costs of $50,000.00 plus agreed disbursements of $10,649.00.

[38]   As requested by Mr Gilchrist, I also direct that a half day of hearing fees should be refunded to reflect the actual time spent at the hearing and the basis on which disbursements were agreed.

G J van Bohemen J