Shi v So
[2021] NZHC 879
•23 April 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-001632
[2021] NZHC 879
BETWEEN YAN SHI (aka MAGGIE SHI)
Applicant
AND
HIN SING SO (aka ESMOND SO)
First Defendant
BIU TAO SO
Second DefendantBIU TAO SO as the Administrator of the Estate of CHUI WA CHEUNG
Second Defendant
Hearing: (On the papers) Judgment:
23 April 2021
COSTS JUDGMENT OF VENNING J
This judgment was delivered by me on 23 April 2021 at 2.00 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Duggan & Murphy, Auckland
Wilson Harle, Auckland
Counsel: C F L Godinet, Auckland
Copy to: The Applicant
SHI v SO (aka ESMOND SO) [2021] NZHC 879 [23 April 2021]
Introduction
[1] The plaintiff, Ms Shi, brought proceedings, including an application for injunctive relief, against the first defendant. The proceedings were issued in August 2020 and discontinued by Ms Shi on 12 February 2021.
[2] The defendants seek costs, calculated on a 2B basis, together with disbursements, for the steps taken by them in the proceedings prior to the discontinuance. Ms Shi opposes the defendants’ application for costs primarily on the basis that she says she was in receipt of legal aid.
Background to the proceeding
[3] Ms Shi’s proceedings concerned a company known as Tim Tim Company Limited. Ms Shi says the company was established by her and the first defendant, Mr Hin Sing So, in November 2012. Mr So is Ms Shi’s husband although they separated in 2016. Ms Shi says the company was incorporated to purchase some apartments in central Auckland.
[4] Ms Shi said that on incorporation she and Mr So were the sole directors and shareholders in the company, each having equal shares. Since their separation the company and its properties are the subject of a relationship property dispute in the Family Court.
[5] In these proceedings Ms Shi alleged that in December 2016 Mr So unilaterally appointed both his parents, Mr Biu Tao So (Mr So Senior) and Ms Cheung Chui Wa So (his mother) as directors and shareholders of the company which involved most of her shares being transferred to Mr So’s parents without her consent. She further alleged that in February 2020 Mr So unilaterally removed her as a director of the company.
[6]Ms Shi sought:
(a)reinstatement of her as a director;
(b)the retransfer of shares to her; and
(c)removal of Mr So Senior and Mrs So as directors and shareholders.
The same relief was sought by way of injunctive relief.
Procedural background
[7] The matter was first reviewed by Campbell J on 28 September 2020. The Judge issued a minute on 29 September 2020. The Judge directed that Mr and Mrs So Senior each be added as defendants to the proceeding (Ms So had died so the relevant defendant was to be her personal representative). He directed Ms Shi to file and serve an amended statement of claim and an amended interlocutory application including Mr and Mrs So Senior as defendants. The Judge also noted the application for injunction was not supported by an undertaking as required. Finally, Campbell J encouraged Ms Shi to engage a lawyer and adjourned the matter through to 26 October for review.
[8] The matter was next reviewed by the Court on 28 October. Whata J issued a minute noting that Ms Shi had filed an amended statement of claim, and an amended application for mandatory injunction. The second defendant had served a notice of opposition. The Judge noted that Ms Shi advised she had made an application for legal aid and sought further time to file further evidence. She also advised that she had endeavoured to serve the first defendant but without success. The Judge made an order for substituted service.
[9] The matter next came before the Court on 18 November 2020. On that date the Judge noted service had now been effected on both first and second defendants and the first defendant had filed a statement of defence to the amended statement of claim and a notice of opposition to the application for injunction. The second defendant maintained his opposition. The Judge noted that Ms Shi advised she had made an application for legal aid and was awaiting a response. The Judge made directions for the progress of the case.
[10] Then on 12 February 2021, before the next review date scheduled by the Court, Ms Shi discontinued the proceeding against both defendants.
Discontinuance
[11] As the plaintiff discontinued the proceeding r 15.23 High Court Rules 2016 applies. Ms Shi must pay costs to the defendants of and incidental to the proceeding up to and including the discontinuance unless the Court orders otherwise.
[12] As noted, both defendants seek costs on a 2B basis for the steps taken by them together with disbursements. The first defendant seeks $10,038.00 plus disbursements of $2,020.00 (in total $12,058). The second defendant seeks $9,560.00 plus disbursements of $1,420.00 (in total $10,980.00).
[13] In a minute issued on 15 February 2021 Powell J directed costs were to be dealt with by an exchange of memoranda. Both defendants sought costs in brief memoranda filed on 5 March 2021. Ms Shi responded by memorandum of 23 March pointing out her legal aid status. The second defendant replied on 25 March. That led to a further reply by Ms Shi on 27 March. The first defendant replied on 30 March. That led to a reply by Ms Shi on 7 April. The first defendant then filed a further memorandum on 8 April which in turn led to a further response by the plaintiff of the same date.
[14] The continued exchange of memoranda was unnecessary and has simply added to all parties’ costs.
Discussion
[15] As the plaintiff has discontinued her proceedings I am satisfied that the defendants are entitled to costs against her unless the plaintiff’s legal aid status alters that position. There are no other reasons why the Court would not apply the general rule. The plaintiff chose to bring these proceedings in this Court even though she had extant proceedings in the Family Court.
[16]Ms Shi relies on s 45 of the Legal Services Act 2011 (the Act) which reads:
45 Liability of aided person for costs
(1)If an aided person receives legal aid for civil proceedings, that person’s liability under an order for costs made against him or her with respect to the proceedings must not exceed an amount (if any) that is reasonable for the aided person to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.
(2)No order for costs may be made against an aided person in a civil proceeding unless the court is satisfied that there are exceptional circumstances.
(3)In determining whether there are exceptional circumstances under subsection (2), the court may take account of, but is not limited to, the following conduct by the aided person:
(a)any conduct that causes the other party to incur unnecessary cost:
(b)any failure to comply with the procedural rules and orders of the court:
(c)any misleading or deceitful conduct:
(d)any unreasonable pursuit of 1 or more issues on which the aided person fails:
(e)any unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution:
(f)any other conduct that abuses the processes of the court.
(4)Any order for costs made against the aided person must specify the amount that the person would have been ordered to pay if this section had not affected that person’s liability.
(5)If, because of this section, no order for costs is made against the aided person, an order may be made specifying what order for costs would have been made against that person with respect to the proceedings if this section had not affected that person’s liability.
…
[17]Aided person is defined in the Act as:1
(a)… a person who is granted legal aid under this Act or the former Act; and
(b)includes—
(i)a person who is granted legal aid on an interim basis:
…
1 Legal Services Act 2011, s 4(1).
[18] Ms Shi argues that no order for costs should be made against her because she was granted legal aid on an interim basis on 24 November 2020 and is therefore an aided person. She submits there are no exceptional circumstances that mean an order should be made.
[19] In AA v LA Mander J considered the effect of s 45.2 The party who was potentially liable for costs in that case was awarded legal aid after the appeal was commenced but before it was heard.
[20] The first issue the Judge addressed was whether the husband was legally aided for the whole or part of the proceedings so that he was prima facie immune from a costs order. Mander J discussed the previous decision of Carter v Western Viaduct Marine Ltd in which case Williams J had held:3
[25] It must follow that, even though grants of legal aid are retrospective from the date of the application, there is no basis in statute to take the view that once litigants are granted legal aid they are immune from orders for costs at any stage of the proceeding, either before or after the grant begins or terminates. Put another way, while the statute understandably limits litigants' liability for costs otherwise payable to them during the period when they have "insufficient means to pay for legal services", there is no reason to conclude that the liability of a litigant for costs does not operate in the normal way when the insufficiency ceases.
[21]Mander J said, in relation to that passage:4
[15] Taken out of context, some of these remarks could be taken to mean the material factor is the date on which legal aid is granted, and that a person is only “legally aided” in respect of costs that are incurred after that date. However, taken as a whole and in the context of that case it is clear this was not the Court's meaning. Rather, the position of the Court was that s 45 immunity can only attach to costs for which the legally aided party is eligible for legal aid. In that case the plaintiffs were not immune for the whole of the costs because they were not eligible for legal aid with respect to the whole of the proceedings.
[22] The Judge then noted that in Gitmans v Alexander Chambers J had, in an obiter observation suggested that a grant could provide protection to an aided person with
2 AA v LA [2017] NZHC 646.
3 AA v LA at [13], citing Carter v Western Viaduct Marine Ltd (2003) 16 PRNZ 1034 (HC).
4 AA v LA at [15].
respect to steps taken by the aided person prior to the grant if no cost determination had been made at the date of the grant.5
[23] Finally, for completeness Mander J distinguished the Court of Appeal decision of Drummond v Townsend in which the Court dealing with costs simply noted:6
“In respect of costs [the appellant] incurred before [the respondent] was granted legal aid, we allow her costs”. No allowance for retrospective application of the grant appears to have been made, although the terms of the grant were not known.
[24]Mander J concluded that:7
The principle lying behind s 45 is that those who are unable to pay for their own legal services (as evidenced by a legal aid grant) should ordinarily be excused from paying the costs of the other party. As a result, the immunity should attach to the costs for which legal aid is provided, not the costs incurred in the period of time before legal aid has been approved.
In the case before him Mander J accepted that the husband was legally aided for the whole of the proceedings and so the immunity applied.
[25] In Lincoln v Attorney-General Churchman J also considered the issue. In that case Mr Lincoln’s status as an aided person under the Act was unresolved at the time of the hearing.8 Mr Lincoln had received an interim grant of legal aid on 17 October 2019 which was continued on 19 February 2020 for specific purposes. In Churchman J’s view that meant Mr Lincoln was an aided person from 17 October 2019 but not for the hearing. Ultimately Churchman J concluded:
[11] On the information available to the Court, Mr Lincoln ultimately only received two interim grants of legal aid: the first on 17 October 2019 (for the purpose of providing an opinion as to the prospect of success of the proceedings), and the second on 19 February 2020 (granted for a judicial settlement conference at a time when the Court had never directed such a conference and the hearing had already commenced). Consequently, applying the approach set out in AA v LA , Mr Lincoln was not eligible for legal aid with respect to the whole of the proceedings, but rather had been given two interim grants to assist with specific pre-hearing matters. Because Mr Lincoln was not an aided person in respect of the substantive hearing, for the purposes of s 4(1)(b)(i), the immunity set out under s 45 does not attach to him in respect
5 AA v LA at [16], citing Gitmans v Alexander (2003) 16 PRNZ 653 (HC).
6 AA v LA at [18], citing Drummond v Townsend [2011] NZCA 185 at [20].
7 AA v LA at [19].
8 Lincoln v Attorney-General [2020] NZHC 1810.
of the costs incurred by the defendant in relation to the substantive hearing or in respect of costs incurred prior to 17 October 2019.
[26] Ms Shi relies on the decision of AA v LA to argue that as she was granted an interim award of legal aid the applications for costs should be refused. She says the decision of Churchman J in Lincoln should be distinguished.
[27] However the issue is rather more nuanced than Ms Shi would have it. The point that can be drawn from the above cases is that the protection afforded by s 45 is not necessarily solely a timing issue of when aid is granted. The purpose of the grant is also relevant.
[28] Ms Shi has annexed a copy of the grant to her submissions. That confirms aid was on an interim basis only. Further information was required to enable consideration of the application for a full grant. There is no suggestion that further information was provided or that Ms Shi was later granted aid for the whole proceedings. The application was recorded as received on 17 November. The grant was said to be “for the specified purpose only and may not be carried over to other steps”. It was for 10 hours only and, as noted, was an interim grant.
[29]Ms Shi went on to note in her submissions that:
The legal advice I received with the legal aid was to discontinue the proceeding in the High Court.
[30] In the absence of any further documentation from Ms Shi in relation to the details of the application of 17 November I infer that the interim grant of 10 hours was to enable counsel to review the proceeding in this Court and to advise Ms Shi whether she should pursue it. That advice appears to have been that she should not pursue the proceeding as Ms Shi conceded that she was advised that she should discontinue the current proceeding.
[31] On that basis, the proceedings were not ultimately taken through to conclusion. The period of any protection under s 45 would necessarily apply from the date of the grant which was 24 November through until the discontinuance on 12 February. The grant was only confirmed on 24 November and was not for the purposes of the whole
proceeding. It was to review Ms Shi’s claims. But by that time a number of steps had been taken by the defendants to respond to the claims. No final grant was made for the entire proceedings. The “protection” does not apply to the period prior to 24 November or to the costs incurred by the defendants for the steps taken by them prior to that date.
[32] I note that the relevant steps taken in the proceedings by the defendants up to the discontinuance were as follows:
First Defendant
12 November 2020: Notice of Opposition
12 November 2020: Statement of Defence
18 November 2020: Conference attendance
22 December 2020: Affidavits (2)
12 February 2020: Memorandum
Second Defendant
25 September 2020: Notice of intention to appear and memoranda of
counsel
28 September 2020 Conference attendance
15 October 2020 Notice of Opposition and Affidavits (2)
29 October 2020 Conference attendance
18 November 2020 Conference attendance
2 December 2020 Statement of Defence to amended claim
[33] On that basis the first defendant is entitled to costs associated with the steps taken on 12 November and 18 November but not for the affidavit which was not completed and filed until after 24 November 2020. The claimable steps amount to 2.8 days at $2,390.00 or $6,692.00. He is also entitled to the associated disbursements of
$220.00.
[34] The second defendant is entitled to costs associated with all steps taken by him prior to 24 November for:
Notice of intention to appear and counsel’s memo: 0.6 Attendance at three conferences: 0.9
Notice of opposition and affidavits in support 2.0
in total, 3.5 days at $2,390 or $8,365.00. I also accept the disbursement of the translation was reasonably necessary for the conduct of the proceeding.
[35] I confirm that I accept there are no exceptional circumstances for the purposes of s 45(2) and (3).
Result/order
[36]The plaintiff is to pay the first defendant costs and disbursements of $6,912.00.
[37]The plaintiff is to pay the second defendant costs and disbursements of
$9,785.00.
Venning J
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