Zhao v KBS Capital Limited - [2025] NZHC 2009

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-641

[2025] NZHC 2009

UNDER the Companies Act 1993

IN THE MATTER OF

an application to put KBS Capital Limited into liquidation

BETWEEN

JIE ZHAO

Plaintiff

AND

KBS CAPITAL LIMITED

Defendant

CLEARWATER CAPITAL PARTNERS DIRECT LENDING OPPORTUNITIES FUND LIMITED PARTNERSHIP

Non-party

Hearing: On the papers

Appearances:

K Mills/C Jiang/J Phillips for the Plaintiff Kishen Kommu for the Defendant

S M Bisley/J Schwarcz for the Non-Party

Judgment:

24 July 2025

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 24 July 2025 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules

Solicitors:

…………………………. Registrar/Deputy Registrar

Tompkins Wake (Chen Jiang/Katie Mills), Auckland, for the Plaintiff Webster Law (Donald Webster), Takapuna, Auckland, for the Defendant
Wilson Harle (Felicity Monteiro/Jonathan Schwarcz), Auckland, for the Non-Party

Copy for:
Kishen Kommu, FortyEightShortland Chambers, Auckland for the Defendant Sebastian Bisley, Thorndon Chambers, Wellington, for the Non-Party

JIE ZHAO v KBS CAPITAL LIMITED [2025] NZHC 2009 [24 July 2025]

Introduction

[1] On 16 May 2025 the Court issued a judgment in which the plaintiff’s, Ms Jie Zhao’s (Ms Zhao), application to put the defendant, KBS Capital Ltd (KBS) into liquidation was dismissed (the Judgment).1 The application was also opposed by a non-party, Clearwater Capital Partners Direct Lending Opportunities Fund L.P. (Clearwater), a significant lender to KBS.

[2] The parties were to file memoranda if they could not agree on costs. The parties have now filed the following memoranda:

(a)Clearwater filed a memorandum dated 24 June 2025.

(b)KBS filed a memorandum dated 25 June 2025.

(c)Ms Zhao filed a memorandum in reply dated 3 July 2025.

Legal principles

[3]Rule 14.6 deals with increased costs and indemnity costs and provides that:

(1)Despite rules 14.2 to 14.5, the court may make an order—

(a)increasing costs otherwise payable under those rules (increased costs); or

(b)that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).

(2)The court may make the order at any stage of a proceeding and in relation to any step in it.

(3)The court may order a party to pay increased costs if—

(a)the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

1 Zhao v KBS Capital Ltd [2025] NZHC 1129.

(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i)failing to comply with these rules or with a direction of the court; or

(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

(iv)failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2025] NZHC 2009
Decision Date: 24 July 2025

CaseChat Overview and Summary

Jie Zhao applied for the liquidation of KBS Capital Limited (KBS) but was unsuccessful. The application was opposed by Clearwater Capital Partners Direct Lending Opportunities Fund L.P. (Clearwater). Clearwater sought indemnity costs against Ms Zhao, or in the alternative, increased costs. KBS sought indemnity costs against Ms Zhao, or in the alternative, increased costs. Ms Zhao did not oppose the costs applications. The Court considered the memoranda filed by the parties and found that neither KBS nor Clearwater were entitled to indemnity costs. The Court found that increased costs were justified for the late withdrawal of various submissions made on behalf of Ms Zhao and the concessions made by her counsel regarding those submissions. These submissions related to issues regarding the validity of the Deed of Subordination, the conflict of evidence between Ms Zhao and Mr Xin as to representations Mr Xin may have made in relation to the Deed of Subordination, issues as to whether any escrow arrangement applied to the Deed of Subordination and whether Ms Zhao had validly withdrawn her consent to the Deed of Subordination, and issues relating to whether the Deed of Subordination was binding as an agreement or not. These issues required submissions and evidence by both KBS and Clearwater. Ms Zhao’s decision not to accept the solvency of KBS, or Clearwater’s offer, was not unreasonable and did not justify increased costs. The Court ordered Ms Zhao to pay increased costs to KBS and Clearwater. The Court disallowed certain disbursements claimed by KBS and Clearwater.

Orders