Lee v District Court at Auckland [2015] NZCA 498 (22 October 2015)

Last Updated: 29 October 2015

IN THE COURT OF APPEAL OF NEW ZEALAND
CA263/2015 [2015] NZCA 498
BETWEEN	YOON LEE Appellant
AND	DISTRICT COURT AT AUCKLAND First Respondent ZHI HONG GAO AND LIN GE Second Respondents JOHN CARTER AND BRENT O’CALLAGHAN Third Respondents THE OFFICIAL ASSIGNEE Fourth Respondent

Hearing:	28 September 2015
Court:	Winkelmann, Dobson and Gilbert JJ
Counsel:	Appellant in person No appearance for First Respondent (abiding) G J Luen and M N Battersby for Second Respondents K J M Robinson for Third Respondents No appearance for Fourth Respondent
Judgment:	22 October 2015 at 11 am

JUDGMENT OF THE COURT

1. The appeal is dismissed.
2. The second and third respondents are entitled to indemnity costs.

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REASONS OF THE COURT

(Given by Dobson J)

[1] This is an appeal from a decision of Ellis J in which her Honour dismissed an application for a stay of enforcement under r 17.29 of the High Court Rules.^[1] Before the appeal was heard, the appellant (Mr Lee) completed his own sale of the property in issue, and applied part of the proceeds to discharge all the debts that were secured by the charging orders.
[2] In those circumstances, the High Court’s refusal to order a stay of enforcement was moot so the Court did not entertain argument on Mr Lee’s appeal from it.
[3] Ellis J had ordered that Mr Lee pay indemnity costs to those who opposed his application, and Mr Lee pursued the part of his appeal that disputed that ruling.

Background

[4] In 2007, the second respondents (the Gaos) issued proceedings in the Auckland District Court against Mr Lee, alleging that he had been negligent in acting for them on a property purchase that could not be completed because the vendor had not acquired title to the property in question. Mr Lee joined the third respondents (Carter Partners), in their capacity as solicitors acting for the vendor of the property, as a third party. On the basis of Mr Lee’s allegation that Carter Partners had given him an oral undertaking not to apply a significant deposit that the Gaos had paid to them, the Gaos also joined Carter Partners as an additional defendant.
[5] In 2010, the District Court found that Mr Lee had been negligent and awarded damages and costs against him.^[2] The District Court found that Carter Partners had not provided any undertaking such as Mr Lee alleged against them.
[6] The quantum of damages awarded against Mr Lee was reduced on an appeal to the High Court, as was the extent of the costs order made against him.^[3] Mr Lee was declined leave to pursue a second appeal by both the High Court and the Court of Appeal.^[4]
[7] Mr Lee then commenced an application for judicial review of the original District Court judgment. That came before Peters J in the High Court and was dismissed.^[5] Mr Lee appealed unsuccessfully to the Court of Appeal from that decision.^[6] Mr Lee then applied to the Supreme Court for leave to pursue a further appeal and that was also declined.^[7]
[8] At various stages of these proceedings, the Gaos and Carter Partners have sought to enforce costs orders made in their favour. By early April 2015, the costs awards in favour of the Gaos stood at $90,811.05 and the costs awards in favour of Carter Partners stood at $93,382. Those parties have obtained a number of charging orders against a property owned by Mr Lee which was otherwise unencumbered. Enforcement of the costs judgments had reached the stage where orders for the sale of the property might be executed by the High Court Sheriff.
[9] Mr Lee then applied for an interim injunction to prevent sale orders in relation to the property being executed. That was the application which Ellis J treated as one for a stay of enforcement, and duly dismissed it.
[10] Ellis J had received submissions on the respondents’ entitlement to indemnity costs as part of their opposition to the application that she had treated as one for stay of enforcement. Her judgment concluded:^[8]

The application for a stay of enforcement is dismissed accordingly. I can see no alternative but to order once again that the respondents are entitled to indemnity costs.

[11] Thereafter, the Gaos and Carter Partners filed memoranda quantifying and verifying their costs. In the absence of any response from Mr Lee for a period of some two months, Ellis J issued a minute determining the costs actually incurred to be reasonable and that the disbursements were properly claimed. She accordingly directed that Mr Lee was to pay the Gaos costs and disbursements of $23,637.26, and Carter Partners the sum of $18,015.77.

Arguments on the appeal

[12] Mr Lee’s discursive submissions challenging the latest award of indemnity costs against him can be dealt with under two headings. First, he argued that there had been a deficient process because Ellis J did not set a timetable for the parties to file memoranda on the issue of costs, and he claimed he was waiting for some direction from the Judge in that regard before responding to memoranda filed on behalf of the Gaos and Carter Partners.
[13] As both Ms Luen and Mr Robinson submitted for the respondents, it was unrealistic for Mr Lee to claim any inadequacy in the opportunity he had to challenge the quantum of costs that were ordered by the Judge. Mr Lee is a solicitor who has pursued a large number of initiatives on his own behalf in the protracted sequence of proceedings, and he had certainly not waited for an invitation from the Court on prior occasions. Both respondents had taken the initiative to seek approval for quantification of indemnity costs without explicit direction from the Judge enabling them to do so, and all involved could reasonably expect Mr Lee to respond without specific invitation, if he was inclined to do so.
[14] The memoranda seeking approval for the quantum of costs were both filed on 28 April 2015, and Ellis J’s minute approving the level of costs was not issued until 30 June 2015. In the circumstances, we do not consider there is any deficiency in the Court’s process in not setting an explicit timetable for the receipt of submissions on the point.
[15] Mr Lee’s second ground for challenging the indemnity costs award was that the Judge had incorrectly characterised the application as having no prospects at all, when Mr Lee claimed there were genuinely arguable points going to the merits of the sequence of substantive decisions against him. He argued that awards of indemnity costs are to be restricted to cases where a litigant conducts him or herself in a frivolous or vexatious manner, which cannot occur if there was some genuinely tenable point being pursued.
[16] Mr Lee’s challenges to the original District Court finding of negligence against him had ostensibly been exhausted, in terms both of appeals and judicial review. The prospect of re-opening the substantive determinations against him depended on an application to the Supreme Court to recall its refusal to grant leave for a further appeal in respect of his unsuccessful judicial review. The Supreme Court’s judgment dismissing his application for leave to appeal was delivered on 24 September 2014.^[9] When the matter was argued before Ellis J on 1 April 2015, no application to recall the Supreme Court’s leave judgment had been filed. We agree with Ellis J that a successful application for recall would require the Supreme Court to reverse its entire reasoning for dismissing the application in the first place. The prospects of that are forlorn.
[17] The Court understood from Mr Lee’s oral submissions that he still intends pursuing some form of request for the Supreme Court to recall its decision, although before us he described his next initiative as a letter to the Chief Justice imploring her to recognise the miscarriage of justice that he considers has occurred.
[18] We agree with Ellis J that Mr Lee’s recent initiatives are attempts to further delay what appeared to be inevitable, namely the sale by some means of the property that had to be realised in order for Mr Lee to meet the outstanding costs judgments.
[19] Accordingly, we are not satisfied that there were any tenable prospects for the application, as treated by Ellis J as one for a stay of enforcement, and it was open to the Judge to treat the respondents as entitled to indemnity costs.
[20] Accordingly, the appeal is dismissed.

Costs on the appeal

[21] The second and third respondents had sought indemnity costs on the implicit premise that if Ellis J was correct in characterising Mr Lee’s application as frivolous or vexatious, then given the resounding rejection of all grounds for it, the pursuit of an appeal would also be frivolous or vexatious and therefore warranting an order for indemnity costs.
[22] In addition, when restraint of a forced sale process became moot because Mr Lee had sold the property and paid the outstanding costs awards, both respondents had offered to waive their claims to costs on the appeal if it was abandoned before hearing. That prospect was raised with Mr Lee at the outset of the hearing and he confirmed his wish to pursue the appeal in respect of costs.
[23] The jurisdiction to award increased costs or indemnity costs is provided in r 53E of the Court of Appeal (Civil) Rules 2005. The circumstances in which the Court may order a party to pay increased costs include where the party opposing costs has contributed unnecessarily to the time or expense of the appeal by taking or pursuing an unnecessary step or an argument that lacks merit, or failing without reasonable justification to accept an offer to settle or dispose of the appeal.^[10]
[24] The jurisdiction to order that a party pay indemnity costs arises, among other circumstances, where the party ordered to pay has acted vexatiously, frivolously, improperly or unnecessarily in commencing, continuing or defending an appeal.^[11] Once Mr Lee had resolved the substantive issue by selling his property, and had paid the existing costs ordered against him, the remaining issue of the quantum of his costs liability for unsuccessfully challenging the enforcement process was within a narrow compass. Having taken those initiatives, he removed any prospect for argument on his appeal that the High Court had been wrong to refuse him a stay. His pursuit of this meritless appeal against the award of indemnity costs was, in the context of the overall proceedings, vexatious, at least from the time he was invited to abandon the appeal on a nocosts basis.
[25] A consistent outcome on costs is accordingly appropriate, and we therefore order indemnity costs in favour of the second and third respondents.
[26] As to the reasonable quantum of such costs, we note that preparation of the responses on behalf of the respondents ought not to have required them to cover any new ground. Although the thorough submissions received were justified, they ought to have been a re-casting and re-ordering of points previously made.
[27] We direct that counsel for the respondents are to file memoranda detailing the costs and disbursements incurred, and serve them on Mr Lee within 10 working days of the issue of this judgment. Mr Lee will then have a period of 10 working days to file a memorandum if he wishes to challenge the reasonableness of the sums incurred. After that period, the Court will consider the quantum with a view to issuing a minute as to the extent of costs and disbursements approved.

Result

[28] The appeal is dismissed.
[29] The second and third respondents are entitled to indemnity costs.

Solicitors:
Hesketh Henry, Auckland for Second Respondents
McElroys, Auckland for Third Respondents

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^[1] Lee v District Court at Auckland [2015] NZHC 737 [High Court decision]. The application was filed as one for an interim injunction to prevent sale orders in relation to property that was the subject of charging orders. The Judge treated it as an application for a stay of an enforcement order.

^[2] Gao v Lee DC Auckland CIV-2007-004-2591, 14 May 2010.

^[3] Lee v Gao HC Auckland CIV-2010-404-3599, 19 May 2011.

^[4] Lee v Gao HC Auckland CIV-2010-404-3599, 4 October 2011; Lee v Gao [2012] NZCA 57.

^[5] Lee v District Court at Auckland [2013] NZHC 1000.

^[6] Lee v District Court at Auckland [2014] NZCA 169.

^[7] Lee v District Court at Auckland [2014] NZSC 130.

^[8] High Court decision, above n 1, at [25].

^[9] Lee v District Court at Auckland, above n 7.

^[10] Court of Appeal (Civil) Rules 2005, r 53E(2)(b)(ii) and (iv).

^[11] Court of Appeal (Civil) Rules 2005, r 53E(3)(a).