Watson v Zhou
[2025] NZCA 22
•24 February 2025 at 11.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA552/2023 |
| BETWEEN | ELIZABETH WATSON |
| AND | LEI ZHOU AND QIUYING ZHANG |
| Court: | Cooke, Venning and Van Bohemen JJ |
Counsel: | D M Fraundorfer and H J O Lewis for Appellant |
Judgment: | 24 February 2025 at 11.00 am |
JUDGMENT OF THE COURT
AThe application for recall is granted.
BOrder D of this Court’s judgment in Watson v Zhou [2024] NZCA 417 is varied so that the question of costs in the High Court is to be addressed by that Court alongside the question of damages.
CThe costs of this application are to lie where they fall.
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REASONS OF THE COURT
(Given by Cooke J)
By judgment dated 4 September 2024, this Court allowed the appellant’s appeal and the respondents’ cross-appeal in part.[1] In particular, the Court overturned the High Court’s judgment against the appellant for contractual mistake under the Contract and Commercial Law Act 2017,[2] but upheld the respondents’ cross-appeal in relation to a breach of warranty claim.[3] It remitted the case to the High Court for it to assess the damages to be awarded to the respondents. The award for breach of warranty appeared to involve a much smaller amount, however. The Court said:
[99] The relevant range for the award accordingly appears to be between approximately $15,000 and approximately $95,000.
[100] Somewhat reluctantly, we have reached the view that we are not in a position to finally resolve what the award should be. We are conscious that there is a significant need for finality in this litigation. It is being conducted between ordinary members of the community in relation to a residential property sale that has gone wrong. Mrs Watson has been in receipt of legal aid. Unfortunately, however, any attempt by us to determine the amount of the award runs the risk of being arbitrary. In these circumstances we feel we have no option but to remit this question to the High Court for determination. It is our expectation that the parties, with the assistance of their lawyers, will be able to resolve the remaining difference without further litigation, and litigation cost.
[1]Watson v Zhou [2024] NZCA 417.
[2]At [56].
[3]At [101(a)].
In relation to the costs the Court considered that the costs on appeal should lie where they fell,[4] but in relation to costs in the High Court:
[103] The High Court awarded costs in the respondents’ favour. Whilst the award of damages will now be lower we consider that this award remains appropriate.
[4]At [102].
Mrs Watson now applies to recall this Court’s judgment regarding the decision on costs in the High Court. The costs award in this Court is not challenged. Her application is supported by her affidavit dated 6 September 2024. The application is opposed, and the respondents have provided an affidavit in opposition from Qiuying (Veronica) Zhang. Both parties have filed written submissions and the application is to be determined on the papers. In the case of the respondents, we take into account the original memorandum of their counsel dated 24 September 2024 as well as the submissions filed in person dated 4 November 2024.
The grounds to recall a judgment are well settled. As the Supreme Court said in S (SC 39/2017) v R:[5]
[3] The general rule is that a judgment, once delivered, must stand for better or worse, subject to appeal. A decision to recall a judgment will only be made in exceptional circumstances. A recall application cannot be used to relitigate the reasons provided in [a] judgment. Nor can it be a means of collateral attack on a decision. Recall will be appropriate where some procedural or substantive error has occurred that would result in a miscarriage of justice.
[5]S (SC 39/2017) v R [2022] NZSC 7 (footnotes omitted). See also H v Minister of Immigration [2022] NZCA 424 at [11].
Whilst the parties advanced a number of arguments in their written submissions and affidavits, the essential point here is that when the Court determined that the costs awarded in the High Court should remain in place notwithstanding the successful appeal and cross-appeal, it was unaware that there had been offers made without prejudice except as to costs at levels that may engage rr 14.10 and 14.11 of the High Court Rules 2016, or any arguments by analogy to those rules.
Whilst the order of costs against the appellant was put in issue by the notice of appeal, neither party addressed submissions to what would happen to the costs award if both the appellant’s appeal and the respondents’ cross-appeal were allowed. This has two significant implications. First, the Court has made its order in relation to the costs in the High Court without being aware of any issue in relation to offers made without prejudice except as to costs. Secondly, the more limited damages that now appear to be in issue may mean these offers engage the relevant principles in the High Court Rules.
We do not consider that significant criticism can be made of counsel for failing to draw the offers to our attention. In this Court parties are required to advance their submissions as to costs without knowing what the outcome of the appeals will be. It may be expecting too much for all possible ramifications to have been addressed in those circumstances, particularly in relation to costs. The outcome here — where the appeal was allowed and cross-appeal allowed in part — may not have been at the forefront of the minds of counsel for either party. The short point is that neither party addressed that possibility.
We also consider it to be of importance that we have remitted the case to the High Court, and we did so because we were not in a position to identify what the damages award should be. Extending that hearing to address the costs consequences of the award is not a significant change, and arguably consistent with our conclusion that the Court was not best placed to assess what the judgment should be.
Regardless, we accept that the high threshold for recall is made out. There would be a substantial miscarriage of justice if Mrs Watson were not allowed to advance the argument that her offers made before trial should affect the costs outcome. That matter has not been substantively addressed. The respondents argue that the offers made were not high enough when expert costs and other disbursements are taken into account. That is not something that we are in a position to assess, including because it may depend on what the ultimate award made by the High Court is. The key point is that costs should be awarded in the High Court taking into account this argument, and all relevant matters. The matter is being remitted to the High Court in any event, and it can assess costs at the same time as assessing the damages award.
We continue to be concerned that the costs of this litigation will be creating a disproportionate burden on the parties, but our expectation remains that the proceedings are capable of resolution.
Result
The application for recall is granted.
Order D of this Court’s judgment in Watson v Zhou [2024] NZCA 417 is varied so that the question of costs in the High Court is to be addressed by that Court alongside the question of damages.
The costs of this application are to lie where they fall.
Solicitors:
Bush Forbes, Tauranga for Appellant
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