Sun Aohua NZ Limited v Kash Investment Limited

[2020] NZHC 520

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2019-404-002699

[2020] NZHC 520

BETWEEN

SUN AOHUA NZ LIMITED

Applicant

AND

KASH INVESTMENT LIMITED

First Respondent

AND

AVIKASH SINGH

Second Respondent

Hearing:

On the papers

Counsel:

H Chung for the Applicant

M M Gunawan for the Respondent

Judgment:

16 March 2020

Reissued:

17 March 2020

JUDGMENT OF VAN BOHEMEN J

This judgment was re-delivered on 17 March 2020 to correct minor errors at para [14](c) and [21]

…………………………

Registrar/Deputy Registrar

Solicitors/Counsel:

Loo & Koo, Auckland

Patel Nand Legal, Auckland

SUN AOHUA NZ LIMITED v KASH INVESTMENT LIMITED [2020] NZHC 520 [16 March 2020]

Introduction

[1]                 The parties seek costs in relation to an application for possession and other orders brought by the applicant, Sun Aohua NZ Ltd, against the respondents, Kash Investment Ltd and its director, Avikash Singh.

[2]                 A fixture was set down for 13 February 2020. However, by joint memorandum dated 12 February 2020, the parties advised they had reached an agreement to stay proceedings pending the outcome of arbitration.

[3]                 By minute dated 12 February 2020, Downs J vacated the hearing and directed the parties to file submissions on costs, to be determined in writing.

History of proceedings

[4]                 On 6 December 2019, Sun Aohua, the owners and lessors of Unit 8, 256-260 Great North Road, Henderson, filed an application for orders against the lessee, Kash Investment, and Avikash Singh.

[5]                 The basis of Sun Aohua’s application was that the respondents were in breach of cl 1.1 of the parties’ lease agreement by their failing to pay rent and outgoings.

[6]                 Sun Aohua sought an order for possession of the Great North Road premises under ss 244 and 251 of the Property Law Act 2007, as well as orders for the respondents to pay outstanding rent, operating expenses, interest and legal costs up until the date upon which possessions orders were granted.

[7]                 In accordance with rr 19.10(1)(f) and 7.24(1)(a) of the High Court Rules 2016, Kash Investment and Mr Singh were  required  to  file  a  notice  of  opposition  by 23 December 2019 but failed to do so.

[8]                 Kash Investment and Mr Singh filed their notice of opposition on 5 February 2020. They opposed Sun Aohua’s application on the grounds that they had entered into an agreement for rent review with the previous landlord, which had resulted in a reduction of annual rent for three years from October 2015, and which bound Sun

Aohua as the new landlord. The respondents claimed they were entitled to be reimbursed for overpaid rent paid in error as a result of their accountant not being aware of the agreement for rent reduction. The respondents also applied to stay the proceedings until the dispute was determined by arbitration pursuant to the arbitration clause in the lease agreement (cl 44.1).

Applicant’s submissions as to costs

[9]                 Sun Aohua seeks an award of wasted costs against the respondents, submitting the respondents’ default caused the 13 February 2020 fixture to be vacated, relying on Jeffreys v Morgenstern.1 Sun Aohua submits that this case is similar to Tasty Fresh Produce Ltd (in liq) v Lowe2 and Madsen-Ries and Levin v Mahoney & Ors3 in which wasted costs were awarded.

[10]              Ms Chung, counsel for Sun Aohua, submits that the respondents’ delays caused the eventual vacation of the fixture only one day prior to the hearing and says the fixture could have been vacated earlier, had the respondents filed their notice of by 23 December 2019 as required by the High Court Rules. Ms Chung says that until 3 February 2020, when the respondents had filed their notice of opposition, Sun Aohua had had to prepare to proceed by way of formal proof at the hearing set down for 13 February 2020. As a result, those costs of preparation had been “wasted”. Ms Chung also says some steps, such as preparation of an updating memorandum and an affidavit of service, could have been avoided completely.

[11]Sun Aohua seeks wasted costs for the following steps:

(a)Costs incurred for filing the updating memorandum on 6 February 2020: $437 (including GST);

(b)Costs incurred for preparing an affidavit of service and affirmation updating the Court on outstanding amounts: $1,092.50 (including GST);

1      Jeffreys v Morgenstern [2013] NZHC 1361.

2      Tasty Fresh Produce Ltd (in liq) v Lowe [2017] NZHC 1448.

3      Madsen-Ries (as liquidators of Fixed Cost Civil Ltd (In Liq)) v Mahoney [2018] NZHC 1864.

(c)50% contribution to the costs incurred of preparing for hearing incurred 3-6 February 2020: $1,398.40 (including GST);

(d)Costs incurred for the applicant’s costs submissions: $2, 481.70.

Respondents’ submissions on costs

[12]              The respondents submit that a reduction or refusal of costs in Sun Aohua’s favour, in accordance with r 14.7(f)(ii) of the High Court Rules, is warranted because Sun Aohua’s application was unnecessary in the first place because of the arbitration clause in the lease agreement. The respondents also seek costs on a 2B basis.

[13]              Counsel for the respondents, Mr Gunawan, points to clause 44.1 of the Deed of Lease which states:

44.1 UNLESS any dispute or difference is resolve by mediation or other agreement, the same shall be submitted to the arbitration of one arbitrator who shall conduct the arbitral proceedings in accordance with the Arbitration Act 1996 …

[14]              Mr Gunawan say the respondents gave Sun Aohua notice, within the required 10 working days of Sun Aohua’s application being filed, that the respondents intended enforce the arbitration clause, as evidenced by the following:

(a)On 20 December 2019, counsel for the respondents emailed Ms Chung stating the respondents intended to file a counter-argument to determine the rent arrears issue. The email said the appropriate forum for determining the dispute was arbitration but that because Sun Aohua’s proceeding was already before the Court it would also be cost and time- effective to add the rent issue to Sun Aohua’s existing application. The email said that if Sun Aohua did not agree to this proposal, the respondents would apply for a stay of proceedings to resolve the dispute in arbitration.

(b)On 16 January 2020 after Ms Chung had not responded, counsel for the respondents sent a further email requesting their response.

(c)On 17 January 2020, Ms Chung responded stating that Sun Aohua required the respondents to file a statement of claim setting out the respondent’s case against Sun Aohua before determining the appropriate forum for resolving the rent dispute.

[15]              Mr Gunawan submits that nothing in these interactions suggested Sun Aohua disputed the validity or applicability of the arbitration clause or intended to plead as such. Mr Gunawan says Sun Aohua ought to have known of the existence of the clause and not commenced proceedings in the High Court or continued with the proceedings after the respondents sought to enforce the arbitration clause.

[16]              Mr Gunawan also says the ‘wasted’ costs calculated by Sun Aohua show over- preparation. Mr Gunawan notes the updating memorandum and preparation for hearing was more than necessary given the hearing was simply a call-over.

[17]              Further, Mr Gunawan says that any delay attributable to the respondents’ late filing of their notice of opposition should take into account the fact that Mr Singh was not contactable by his counsel from 6-31 January 2020 because he was delayed by storms in Fiji. Mr Gunawan submits this would not have been a problem had arbitration with its flexible timetabling, as opposed to High Court proceedings, been the forum of resolution.

Discussion

[18]              I do not consider that the respondents have engaged in conduct warranting wasted costs and agree that there are grounds for reducing or refusing the Sun Aohua’s costs.

[19]              It cannot be said the respondents are the ‘author of the need for adjournment’ through unjustifiably wasting the Court and applicant’s time, as was the basis for awarding wasted costs in the authorities Ms Chung has referred to.4 The preparation resulting  in  Ms  Chung’s  claim  for  wasted  costs  is  wasted  only  insofar  as  the

4      Madsen-Ries (as liquidators of Fixed Cost Civil Ltd (In Liq)) v Mahoney [2018] NZHC 1864 at

[16] and Jeffreys v Morgenstern [2013] NZHC 1361 at [37]-[39].

originating application did not need to be brought in the first place or pursued beyond the respondents’ call for arbitration.

[20]              Save for exceptional circumstances such as urgency, the general position is that the courts expect plaintiffs and applicants to attempt to resolve disputes through other means before resorting to litigation, avoid the incurrence of costs and proceedings that ‘might fairly have been rendered unnecessary by a little forethought’, and pursue a less expensive course of effecting the same outcome where it is readily available.5 I find all three of these circumstances are engaged by the applicant’s conduct here.

[21]              Sun Aohua should have commenced arbitration proceedings in the first instance in accordance with the arbitration clause in the lease agreement. The language of the arbitration clause makes arbitration mandatory, not optional, subject only to mediation or other agreement. Sun Aohua took unnecessary steps when the respondents made it clear at an early stage that they were willing to resolve matters through arbitration. It was not necessary or reasonable to demand that the respondents file a statement of claim before agreeing to arbitration.

[22]              In their actions, Sun Aohua have cut across one of the purposes of including an arbitration clause in the parties’ lease agreement, namely avoiding the time and expense of commencing court proceedings to resolve disputes that may arise. The respondents should not have been made to come this Court and defend themselves in the first place, and only to end up at arbitration.

[23]              For these reasons, I dismiss Sun Aohua’s application for costs and grant costs in the respondents’ favour.

Result

[24]The respondents are entitled to costs and disbursements on a 2B basis. The

5      G E Dal Pont Law of Costs (3rd ed, LexisNexis, Butterworths Australia, 2013) at [8.18] cited in

Morrell v World Solar Ltd [2018] NZHC 518 at [22].

respondents are to provide a schedule of costs to the applicant in 10 working days. If costs cannot be agreed, they are to be fixed by the Registrar.

G J van Bohemen J