Zhang v Guan
[2017] NZHC 2710
•6 November 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2016-404-2217 [2017] NZHC 2710
BETWEEN QIANGLI ZHANG
Plaintiff
AND
ZUNLONG GUAN First Defendant
HUANRUI LIU Second Defendant
JING JIANG Third Defendant
ZENGMIN HOU Fourth Defendant
Hearing: On the papers Judgment:
6 November 2017
JUDGMENT OF DUFFY J
This judgment was delivered by me on 6 November 2017 at 3.30 pm pursuant to
Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Solicitors / Counsel
Yu Lawyers, Balmoral
Glaister Ennor, Auckland
E J Werry, AucklandDaniel Zhang, Auckland
ZHANG v GUAN COSTS [2017] NZHC 2710 [6 November 2017]
[1] I refer to paragraph [7] of the minute of 19 May 2017, in which I indicated that when memoranda on costs were received I would consider whether they could be dealt with on the papers or not. I now have memoranda on the question of costs.
[2] I am now sufficiently informed to determine whether costs should be ordered against the third defendant, Jing Jiang, and her lawyers. Accordingly, I shall now do so.
[3] Some understanding of the background to the costs application is required.
Background
[4] The first defendant Zunlong Guan and Ms Jiang are apparently mother and son. When first served with the proceeding Mr Guan apparently engaged Richard Zhao, solicitor, and Daniel Zhang, barrister, to act for Mr Guan and Ms Jiang. Later Ms Jiang instructed Northern Legal Ltd to act for her. The New Zealand Law Society’s Register of Lawyers currently records that Ms Puhan is the director of Northern Legal Ltd.
[5] Documents filed in this proceeding for Ms Jiang are stated to be filed by Norther Legal Ltd. The solicitor acting is recorded as James Guy. Correspondence annexed to an affidavit sworn by Ms Jiang in this proceeding and dated 8 May 2017 is written by Northern Legal Ltd and signed by James Guy, who then described himself as a senior associate of Northern Legal Ltd. The New Zealand Law Society’s Register of Lawyers currently records Mr Guy as practising as a sole practitioner who is also a consultant to Norther Legal Ltd. It is not clear to me if Mr Guy’s status has changed since he first began filing court documents for Ms Jiang.
[6] Either Ms Jiang or her lawyers formed the view that Mr Zhao and Mr Zhang had taken steps on Ms Jiang’s behalf without proper instruction to do so and in circumstances where those steps were unlikely to succeed. The steps were: (a) an application by Mr Guan and Ms Jiang to stay these proceedings; and (b) opposition to the plaintiff’s application to strike out the stay application brought by Mr Guan
and Ms Jiang (the subsequent applications). This led to Ms Jiang’s present lawyers (at this point I am not clear on whether her solicitor is Mr Guy, as a sole practitioner, acting on instructions from Northern Legal Ltd; or Northern Legal Ltd with whom Mr Guy has contracted under a consultancy arrangement) abandoning those steps and agreeing to pay costs to the plaintiff.1 In addition, Ms Jiang’s present lawyers took steps against Mr Zhao and Mr Zhang. In short, they filed a costs application against Mr Zhao and Mr Zhang seeking to recover the allegedly wasted costs incurred as a result of them filing the subject applications.
[7] The costs application when first filed (22 March 2017) sought an award of costs against Richard Zhao Lawyers Ltd. Later the application was amended (8 May
2017) to seek costs against Mr Zhao and Mr Zhang. The application relevantly relied on r 14 of the High Court Rules and Harley v McDonald.2
[8] On 19 May 2017 various interlocutory applications in these proceedings, including Ms Jiang’s costs application against Messrs Zhao and Zhang, were called before me. Mr Zhang appeared for himself and on behalf of Mr Zhao to protest jurisdiction, and in the alternative to oppose the making of the costs order.3 In short, Mr Zhang’s stance was that the Court has no jurisdiction to award costs under the High Court Rules at the request of a party against that party’s former lawyers, and
that the costs application was otherwise misconceived.
[9] I pressed Mr Guy about the basis for Ms Jiang seeking costs against Messrs Zhao and Zhang. The approach seemed to me to run counter to what was said in Harley v McDonald. It seemed to me that if Messrs Zhao and Zhang had wrongly represented they were instructed to act on behalf of Ms Jiang when the subject applications were filed, the correct approach would be for Ms Jiang to bring civil proceedings against them to recover her loss through their allegedly unauthorised actions or complain to the New Zealand Law Society about their conduct. Those
courses of action are consistent with the observations of the Privy Council in Harley
1 Those costs are set out at [1] of the minute of 19 May 2017.
2 Harley v McDonald [2001] UKPC 18, [2001] 2 AC 678.
3 Messrs Zhao and Zhang each filed documents headed “notice of protest to jurisdiction/opposition”.
v McDonald,4 and they would ensure that Messrs Zhao and Zhang were given a proper opportunity to be heard as well as affording them effective appeal rights. On the other hand, because of the way in which Ms Jiang had approached matters, Messrs Zhao and Zhang were not parties to the proceeding and so their standing to exercise appeal rights was difficult to discern; the interlocutory process did not readily lend itself to ensuring Messrs Zhao and Zhang were given a proper opportunity to be heard; and nor did it readily allow for disputed evidence to be resolved. Given the serious risk to the reputations of Messrs Zhao and Zhang in light of potential attacks on their credibility, a substantive hearing with oral evidence and cross-examination offered the better procedure for determining issues raised by Ms Jiang’s costs application.
[10] The costs application was stood down while Mr Guy sought instructions following which he returned to the Court and advised me the application for costs was abandoned. This led to Mr Zhang seeking an award of costs for the time and effort incurred in the protest to jurisdiction. Following this, the parties were given the opportunity to file memoranda on costs.
Costs against Ms Jiang
[11] The discontinuance of the costs application on the day of the hearing indicates that Messrs Zhao and Zhang have enjoyed a measure of success. On the other hand, Mr Guy responsibly recognised the costs application was not well founded and so chose to discontinue it, albeit late in the day.
[12] Rule 15.23 of the High Court Rules, which relates to discontinuance of substantive proceedings, has been applied by analogy to interlocutory applications.5
The general rule, as applied to interlocutory applications, is that the discontinuing party must pay the costs of the opposing party of and incidental to the discontinued application up to and including the discontinuance. I see no reason for treating Ms Jiang differently. Accordingly, I am satisfied that Messrs Zhao and Zhang are entitled to an award of costs against Ms Jiang.
[13] I consider that category 2B provides a proper foundation for quantifying the award of costs. I adjust the schedule of costs provided by Messrs Zhao and Zhang to reflect the fact that the hearing took very little time, so an allocation of quarter of a day is appropriate. On this basis the sum of costs comes to $12,599.50.
[14] Messrs Zhao and Zhang seek an uplift in the form of either increased or indemnity costs.
[15] There is nothing to support an award of indemnity costs. Such costs are usually only awarded when a party has behaved either very badly or very unreasonably.6 The relevant factors for consideration are set out at r 14.6(4). Here Ms Jiang initiated the wrong procedural approach. Both she and Messrs Zhao and Zhang have in their respective costs memoranda traversed the merits of the costs application she made against them. Further, Messrs Zhao and Zhang sought to persuade me that this was one of those exceptional cases where the merits of their case against Ms Jiang’s costs application were so obvious that this should influence the costs outcome.7
[16] However, I consider I am in no position to determine the questions they raise as I never heard the matter argued. Moreover, the merits or lack of merit are not obvious to me as I am in no position to determine where the truth lies. I have already said I found the r 14 costs procedure to be unsuited to resolving the dispute between Ms Jiang and Messrs Zhao and Zhang. Accordingly, it would be wrong in the context of this subsequent costs application to embark on assessing the merits of the earlier application. Had Mr Guy proceeded with the earlier costs application against Messrs Zhao and Zhang I would then have formed a view of its merits. But I cannot do so from disputed material put forward by way of counsels’ memoranda. I have considered the respective arguments in terms of r 14.6(4); however, I am not persuaded indemnity costs are warranted here. Accordingly, I find there is no entitlement to indemnity costs.
[17] For an award of increased costs the Court takes the quantum of scale costs and assesses whether, in terms of r 14.6(3), any increase is warranted. First, this is not a case where the time required by Messrs Zhao and Zhang would substantially exceed the time allowed for under band C. Accordingly, in terms of r 14.6(3)(a) no increase in costs is warranted.
[18] Secondly, whilst Ms Jiang’s approach to the costs application was misconceived, the responses she received from Messrs Zhao and Zhang did little to relieve her of such misconception. Their response was to file a protest to jurisdiction when the appropriate response was to file a notice of opposition. This Court undoubtedly had jurisdiction to determine whether there was a jurisdictional basis for Ms Jiang to seek costs against Messrs Zhao and Zhang. Messrs Zhao and Zhang also followed incorrect procedure. Further, the response of Messrs Zhao and Zhang was unhelpful as they communicated no sensible arguments to Ms Jiang’s lawyers that could have led to Ms Jiang reconsidering her position. In the lead-up to the hearing none of the parties conducted themselves in a way that was likely to lead to a sensible and cost-effective outcome. Much of the time and expense Messrs Zhao and Zhang incurred was directed at attacking the merits of Ms Jiang’s costs application when the better approach would have been to focus on its procedural weakness. In their own respective ways each party took or pursued unnecessary steps. I am satisfied the conduct was mutually poor. Accordingly, after considering the relevant factors in r 14.6(3)(b), (c) and (d) and the particular circumstances of what occurred here, I am satisfied that no increased costs are warranted.
[19] I see no basis for an award of costs against Ms Jiang’s lawyers. Their actions were not well considered and they could have handled the matter better than they did. Also, I accept there was some delay in meeting Court timetabling orders. However, Harley v McDonald makes it clear that something far more egregious than what occurred here is required before costs will be awarded against lawyers personally.
[20] For reasons already stated I have paid no regard to the merits of Ms Jiang’s costs application. Further, I consider that the fact Mr Guy, albeit belatedly, recognised the application was misconceived and so took steps to have it
discontinued is a strong factor against awarding costs against him personally. Regarding Ms Puhan, her level of involvement is not properly established. Evidence would be required. However, there is nothing presently before me to suggest her level of responsibility for Ms Jiang’s costs application would exceed that of Mr Guy. Accordingly, I consider there is no basis for awarding costs against her personally. The other cases that Messrs Zhao and Zhang rely upon for an award of costs against lawyers personally are not helpful as each turns on its own particular circumstances.
Further, as regards L v Chief Executive of the Ministry of Social Development,8 this
decision was subsequently overturned by the Court of Appeal.9
[21] Because of the conflict of interest in relation to the costs application made by Messrs Zhang and Zhou, Ms Jiang is represented by Michael Lenihan. He has filed submissions on her behalf that any costs award be made against her lawyers. For the reasons already outlined I reject her submission. Ms Jiang has remedies available to her against her lawyers if she considers some reimbursement from them of the costs award against her is warranted.
Result
(a) Messrs Zhao and Zhang are awarded category 2B costs against
Ms Jiang.
(b) Such costs are in the sum of $12,599.50.
8 L v Chief Executive of the Ministry of Social Development (2008) 19 PRNZ 116 (HC).
9 Deliu v Chief Executive of the Ministry of Social Development [2012] NZCA 406, (2012) 21
PRNZ 294.
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