Zhou v Pacific Pearl Accommodation Limited

[2021] NZHC 969

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2020-404-000113

[2021] NZHC 969

UNDER

Sections 244 and 251 of the Property Law Act 2007

IN THE MATTER OF

of a lease dated 15 May 2013 in respect of the premises at 9 Bicknell Road, Favona, Auckland

BETWEEN

KENING ZHOU and NAIYUAN SANG

Applicants

AND

PACIFIC PEARL ACCOMMODATION LIMITED

Respondent

Hearing:

On the papers

Appearances:

D L C Liu for the Applicants

C A Murphy for the Respondent

Judgment:

4 May 2021

JUDGMENT OF VAN BOHEMEN J

[Costs]

This judgment was delivered by me on 4 May 2021 at 11.30am Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

Solicitors/Counsel:

Heritage Law Ltd, Auckland High St Chambers

ZHOU v PACIFIC PEARL ACCOMMODATION LIMITED [2021] NZHC 969 [4 May 2021]

Introduction

[1]    By judgment dated 26 November 2020, I dismissed the application by Kening Zhou and Naiyuan Sang (the Trustees), as trustees of the Zhou & Sang Family Trust (the Trust), for orders cancelling a lease over the property at 9 Bicknell Road, Favona, Auckland that was leased to Pacific Pearl Accommodation Ltd (Pacific Pearl).1 I found that, except in one respect which I did not consider sufficiently serious to justify cancellation of the lease, the Trustees had not made out the grounds for cancellation set out in their notice dated 27 September 2019 made under s 246 of the Property Law Act 2007. The exception was Pacific Pearl’s failure to pay the trustees’ legal costs of approximately $5,747.00 incurred in considering Pacific Pearl’s request to assign the lease.2

[2]    I held that Pacific Pearl was entitled to costs on a 2B basis and gave leave to the parties to file memoranda if they could not agree costs.

Memorandum by counsel for Pacific Pearl

[3]    By memorandum dated 17 December 2020, Ms Murphy, counsel for Pacific Pearl, sought costs of $11,472.00 plus disbursements of $21,844.91, making a total claim of $33,316.91. Ms Murphy also sought costs of $956.00 for preparation of her memorandum.

Memorandum by counsel for the Trustees

[4]    By memorandum dated 26 January 2021, Mr Liu, counsel for the Trustees, submitted that I should recall my judgment pursuant to r 11.9 of the High Court Rules 2016 because I had determined costs without inviting submissions from the parties. Mr Liu also submitted that I should not have awarded costs against the Trustees because, according to Mr Liu, I had granted an indulgence to Pacific Pearl by holding that its non-payment of legal costs was insufficiently serious to justify cancellation of the lease, even though cl 29.1 of the lease provides that:

1      Zhou v Pacific Pearl Accommodation Ltd [2020] NZHC 3133.

2 At [109].

Failure to pay rent or other moneys payable under this lease on the due date shall be a breach going to the essence of the Tenant’s obligations under the lease.

[5]    Mr Liu also referred to s 37(2)(a) of the Contract and Commercial Law Act 2017 which provides that a party may cancel a contract if the parties have expressly or impliedly agreed that the performance of the term is essential to the cancelling party.

[6]    In addition, Mr Liu advised that if I did not accept the above submissions, he accepted Mr Murphy’s calculation of costs, but took issue with most of the disbursements claimed by Pacific Pearl and with the claim for costs incurred in preparing the costs memorandum. He also said Ms Murphy’s calculations for disbursements were inclusive of GST and submitted that they should be expressed as being exclusive of GST because the Trust is registered for GST.

Discussion

Should I recall my judgment?

[7]    Mr Liu is not correct in his submission that I determined costs without inviting submissions from the parties. As the successful party, Pacific Pearl was entitled to costs. That is consistent with the first principle in r 14.2(1) of the High Court Rules, that the party who fails with respect to a proceeding should pay the costs of the party who succeeds. All I did was to set the appropriate rate for calculating costs, which is standard practice. I also granted leave to the parties to make submissions on costs if they could not agree.

[8]    There is no basis, therefore, for me to recall my decision. This case does not fall within the limited circumstances in which a judgment may be recalled as set out by Wild CJ in Horowhenua County v Nash (No 2).3

[9]    I accept that Mr Liu did not address cl 29 of the lease or s 37(2)(a) of the Contract and Commercial Law Act in his submissions at the hearing. However, I do not accept that that omission is sufficient to bring this case within the second category

3      Horowhenua County v Nash (No 2) [1968] NZLR 632 (HC) at 633.

identified by Wild CJ in Horowhenua County: namely, where counsel fail to direct the Court's attention to a legislative provision or authoritative decision of plain relevance.

[10]   Even if Mr Liu had drawn those provisions to my attention, that would not have changed my conclusion that Pacific Pearl’s failure to pay costs of approximately

$5,747.00 was not sufficiently serious to justify cancellation of the lease in the context of a dispute in which the Trustees, through Mr Liu, had alleged that Pacific Pearl had breached the lease in a variety of ways, even though most of those alleged breaches were not set out in the PLA notice and did not relate to the proposed assignment of issue, the issue to which the unpaid costs related. In so doing, the Trustees put Pacific Pearl to considerable cost and delay. In those circumstances, I do not accept that to hold that non-payment of the Trustees’ legal costs did not justify cancellation of the lease was a concession sufficient to offset the Trustees’ liability for costs as the unsuccessful party.

Costs on costs

[11]   I agree with Mr Liu that it is unusual for the Court to award costs on costs.4 I do not see a basis for such an award in this case, even though it appears from        Ms Murphy’s memorandum that the Trustees failed to confer on costs after Pacific Pearl had provided their calculation of costs. Given the nature and range of the Trustees’ objection on costs, this is not a case where a response by the Trustees would have resolved matters.5 I disallow, therefore, Ms Murphy’s claim for $956.00 for preparation of her costs memorandum.

Challenged disbursements

[12]   I accept that Ms Murphy’s memorandum does not provide sufficient information to justify the claim for $1,637.00 for Noel King. There is no explanation of who Noel King is or what work he did for Pacific Pearl. For that reason, I agree that amount should be deducted.

4      Jeffreys v Morgenstern [2013] NZHC 1361 at [40]; Barry Park Investments Ltd v Body Corporate No 95388 [2016] NZHC 1527 at [25]; DKMK Ltd v Skibo Ltd [2020] NZHC 3293 at [12].

5      See Epsom Woods Ltd v Waitakere Farms Ltd [2020] NZHC 3137.

[13]   I do not accept, however, Mr Liu’s submission that Pacific Pearl cannot claim the costs it incurred in obtaining building and fire safety reports on the premises. Even though building compliance and fire safety issues were not identified in the PLA notice and so were not a proper basis for cancelling the lease, they featured prominently in the Trustees’ allegations that Pacific Pearl had breached cl 21 of the Lease and in  Mr Liu’s submissions at the hearing. It was entirely appropriate, therefore, that Pacific Pearl should have obtained those reports in order to defend the Trustees’ allegations. It is similarly appropriate that the Trustees should now reimburse Pacific Pearl the costs incurred in obtaining the reports.

Goods and Services Tax

[14]   The GST issue is to be resolved in accordance with the Goods and Services Tax Act 1985 and should not require the Court’s intervention. Scale costs are GST neutral, and an award of disbursements will not include GST where the successful party is GST registered and able to recover the GST component.6 For convenience, I express the Trustees’ liability to Pacific Pearl in figures exclusive of GST.

Result

[15]The Trustees are to pay Pacific Pearl:

(a)       Costs of $11,472.00;

(b)Disbursements of $17,179.34, comprising:

1. Filing fee: $95.65 (GST excluded);

   (ii)AL Building Consultants Ltd: $13,083.69 (GST excluded);7

   
   

   6      See “New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282, (2016) 27 NZTC 22-058” at [7] and [17].

   7      Taking into account “Discount for prompt payment” of $451.67 applied by A L Building Consultants in invoice dated 24 June 2020.

(iii)BCD Group: $4,000.00 (GST excluded).

G J van Bohemen J