Xing Seng Limited v Singh
[2023] NZHC 1990
•27 July 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1095
[2023] NZHC 1990
BETWEEN XING SENG LIMITED
Plaintiff
AND
TARA SINGH
Third Defendant
Hearing: On the papers Appearances:
No representation for the Plaintiff
Mitch Singh/Paul Kim for the Third Defendant
Judgment:
27 July 2023
COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
This judgment was delivered by me on 27 July 2023 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
Glaister Ennor (M Singh/P S Kim), Auckland, for the Third Defendant
XING SENG LIMITED v TARA SINGH [2023] NZHC 1990 [27 July 2023]
Background
[1] The third defendant’s (Mr Singh’s) application for security for costs in this proceeding which was set down for a hearing on 11 November 2022, was granted by consent and recorded in the minute of Moore J dated 9 November 2022.
[2] As directed at [8] of Moore J’s minute, counsel for the plaintiff filed a memorandum as to costs dated 25 November 2022 and the plaintiff, which was represented by Mr Xing (Mr Xing), filed a memorandum in reply dated 9 December 2022.
[3] Mr Singh seeks an order of indemnity costs jointly against the plaintiff, Xing Seng Ltd (XSL) and Mr Xing personally.
Mr Singh’s submissions
Costs against Mr Xing
[4] In support of an order for costs against Mr Xing personally, Mr Singh, as counsel for Mr Singh, makes the following submissions:
(a)XSL has no assets and is no longer trading, and is insolvent and still owes Mr Singh an outstanding sum for costs from an earlier judgment of Lang J dated 12 January 2022. Accordingly, any costs order solely against XSL will not be paid.
(b)Mr Xing is, in any event, the real plaintiff in this case as he brought the first round of proceedings in his own name and only purchased the shares in XSL in order to bring these current proceedings, following Associate Judge Andrew’s dismissal of the earlier proceedings. Mr Singh also points to Lang J’s comment in his earlier judgment on costs.1
1 Xing v Bains Brothers Ltd [2022] NZHC 14.
(c)Mr Singh refers to three authorities, as supporting the proposition that costs can be awarded personally against a director as follows;
(i)Minister of Education v H Construction (North Island) Ltd (in rec and in liq):2
[43] Costs against non-parties are exceptional … if a non-party funds a case and controls or benefits from it, “justice will ordinarily require” they pay costs. This is because he, or she, or it is regarded as the real party.
(ii)The English Court of Appeal authority in Metalloy Supplies Ltd v MA UK Ltd,3 cited by Associate Judge Bell in Concrete Structures (New Zealand) Ltd v Smith:4
[18] The Court has a discretion to make a costs order against a non-party. Such an order is, however, exceptional, since it is rarely appropriate. It may also be made in a wide variety of circumstances where the third party is considered to be the real party interested in the outcome of the suit. It may also be made where the third party has been responsible for bringing the proceedings, and they have been brought in bad faith or for an ulterior purpose or there is some other conduct on his part which makes it just and reasonable to make the order against him. It is not, however, sufficient to render a director liable for costs that he was a director of the company and caused it to bring or defend proceedings which he funded and which ultimately failed. Where such proceedings are brought bona fide and for the benefit of the company, the company is the real plaintiff. If in such a case an order for costs could be made against a director in the absence of some impropriety or bad faith on his part, the doctrine of the separate liability of the company would be eroded and the principle that such orders should be exceptional would be nullified.
(iii)The Court of Appeal’s judgment in Kidd v Equity Realty (1995)
Ltd where the Court said:5
[20] Where a company litigant was insolvent at the time of the litigation, a court may well be easily persuaded that its directors were acting for their own purposes rather than those of the company and its creditors. If so, the court will conclude that they therefore were the “real parties” and ought to pay
2 Minister of Education v H Construction (North Island) Ltd (In rec and In liq) (2019) 24 PRNZ 549 at [43].
3 Metalloy Supplies Ltd (in liquidation) v MA (UK) Ltd [1997] 1 All ER 418 at 424 - 425.
4 Concrete Structures (NZ) Ltd v Smith (2019) 25 PRNZ 74 at [18].
5 Kidd v Equity Realty (1995)Ltd [2010] NZCA 452 at [20].
costs accordingly. The same conclusion is likely to be reached where those promoting litigation have sought to take advantage of the insolvency of the company by taking, either expressly or by implication, a “heads I win, tails you lose” approach. In circumstances where the claim was speculative and/or devoid of merit, the court may well conclude that this was the approach of the director or directors concerned. But, and in respectful disagreement with the judgment of Morgan J, we consider that the sort of circumstances which are routinely present when closely held companies litigate do not in themselves warrant an order for costs against those who control them.
Indemnity Costs
[5] Mr Singh makes the following submissions as grounds for an order for indemnity costs against XSL and Mr Xing:
(a)The security for costs application, which was ultimately granted by consent, was unnecessary and could have been avoided had XSL acted reasonably from the outset;
(b)On 2 May 2022, Mr Singh wrote to counsel for XSL making an open offer in relation to security for costs of $30,000 payable in two tranches, which was not accepted, and Mr Singh was therefore required to file his application. The order granted was for $40,000 of security. The email of 2 May 2022 foreshadowed indemnity costs would be sought against XSL and Mr Xing in the event that an application was necessary.
(c)In its notice of opposition, Mr Xing did not challenge the need for, or quantum of, the security for costs, but offered a personal guarantee which was not acceptable.
(d)Mr Xing has misled the Court in that in an affidavit he stated he would be in receipt of a substantial sum of money personally from other legal proceedings Mr Xing is involved in. However this conflicts with the evidence at the relevant hearing, where he acknowledged he would
have received the funds as a trustee and was obliged to account to a third party for them.
(e)On 23 September 2022, prior to commencing work on the primary submissions for the hearing, Mr Singh again wrote to counsel for XSL enquiring about the prospect of a resolution. There was no substantive reply received.
(f)On 8 November 2022, three days before the hearing, XSL filed a memorandum seeking to explain the turn of events that led to XSL consenting to the security application. The veracity of that explanation is questioned by Mr Singh.
(g)There is no commonality between this proceeding and the proceeding referred to at [5](d), as such no reason why Mr Singh’s security against a barren costs order should be contingent on a wholly unrelated case being run by Mr Xing himself.
Mr Xing’s submissions
[6] Mr Xing filed a memorandum dated 9 December 2022 in reply to Mr Singh’s memorandum of 25 November 2022. In that memorandum, Mr Xing makes the following submissions:
(a)that XSL has paid over 95 per cent of the costs ordered by Lang J and a request for the final amount from Mr Singh at 30 September 2022 has not been replied to. (This is disputed by Mr Singh in an email to the Court (and others) dated 14 December 2022);
(b)the case law relied on by Mr Singh, as set out at [4](c) above, are not appropriate in this matter;
(c)it is a normal matter for some defence from Mr Xing to be raised to the application for security for costs and this is appropriate;
(d)the indemnity costs sought by Mr Singh are not appropriate as Mr Xing’s defence to the application was appropriate;
(e)Mr Xing proposes a maximum of costs on a 2B basis is appropriate as the Court hearing was avoided by orders being granted by consent.
Result
[7] I am of the view that costs should be awarded against Mr Xing and XSL jointly. There is no contrary evidence put forward by Mr Xing to Mr Singh’s assertions that XSL is not trading, has no assets and is likely insolvent. Mr Singh’s submissions that any costs order against XSL alone would remain unpaid is unchallenged.
[8] I also accept Mr Singh’s submission that Mr Xing is the “real party” to the proceedings, particularly given the history of the first round proceedings: Associate Judge Andrew’s dismissal of them and then Mr Xing re-purchasing the shares in XSL in order to bring the current proceedings. In my view, this brings Mr Xing’s conduct within the type of conduct described by Associate Judge Bell in the Concrete Structures decision, which justifies an order for costs against a director of the plaintiff personally.6
[9] I accept the submissions of Mr Singh that the application for security for costs should to have been necessary because:
(a)an offer was made by Mr Singh on behalf of his client prior to the application being lodged to settle the question of security for costs, and further attempts were made by Mr Singh to resolve matters subsequent to the application being lodged;
(b)there was no real opposition by Mr Xing to the application as he did not oppose the need for security for costs or the quantum, but offered a personal guarantee.
6 Above, n 4.
[10] However, I do not consider indemnity costs should be awarded against XSL and Mr Xing. Having reviewed the memorandum of Mr Xing’s former counsel dated 8 November 2022 explaining the background to Mr Xing offering a guarantee and then subsequently consenting to the security for costs orders, in my view the circumstances do not cast Mr Xing’s actions in a sufficiently castigating light to justify indemnity costs. However as noted at [9], the application by Mr Singh should not have been necessary, and accordingly I consider a reasonable balance between the parties to achieve a just outcome is for an order for 2B cost to be paid by Mr Xing, with a 50 per cent uplift.
Orders
[11] I order that Xing Seng Limited and Mr Xing are jointly liable to pay costs to the third defendant, Mr Singh, of $10,755.00, being 2B costs plus a 50 per cent uplift, together with disbursements of $642.50, totalling $11,397.50.
…………………………….. Associate Judge Taylor
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