|
|
Home
| Databases
| WorldLII
| Search
| Feedback
Court of Appeal of New Zealand |
Last Updated: 16 December 2015
|
IN THE COURT OF APPEAL OF NEW ZEALAND
|
|
|
BETWEEN
|
First Appellant |
|
Second Appellant |
|
|
AND
|
First Respondent |
|
Second Respondent |
|
|
Counsel: |
F C Deliu for Appellants
P T Rishworth QC and E J Devine for First Respondent
P F Chambers for Second Respondent |
|
(On the papers) |
JUDGMENT OF FRENCH J
(Review of Registrar’s
Decision)
____________________________________________________________________
REASONS
Introduction
[1] The appellants have filed an appeal against the quantum of a costs order made by Asher J in their favour in the High Court at Auckland.[1] They sought dispensation of security for costs on the appeal. The Registrar declined to grant dispensation. The appellants now apply for the Registrar’s decision to be reviewed.
Background
[2] The first appellant, Richard Zhao Lawyers Ltd (the company), is a law firm operated by the second appellant, Mr Zhao, a legal practitioner. The appellants acted for the second respondent, Ms Chen, in relationship property proceedings against her former husband. Ms Chen became dissatisfied with the services provided by Mr Zhao and instructed new solicitors.
[3] Ms Chen wanted trust funds held by the company to be transferred to her new lawyers. The funds in question were sale proceeds of $212,370.40 from the sale of a property at issue in the relationship property proceedings. Mr Zhao refused to transfer the funds on the grounds his company had a lien over the funds for unpaid legal fees of $13,402.25, and because he had given an undertaking to the husband’s solicitors not to disburse the money until the relationship property dispute was resolved.
[4] On the application of Ms Chen, the Family Court ordered the company to transfer all of the funds to Ms Chen’s new lawyers to be held undisbursed by the new lawyers without any further payment being made, unless Ms Chen and her husband agreed otherwise or there was a Court order, whichever occurred first.[2] Mr Zhao continued to refuse to transfer the funds. This resulted in the Family Court finding him to be in contempt of Court and referring the matter to the New Zealand Law Society.[3]
[5] The company then issued proceedings in the High Court seeking judicial review of the various rulings made by the Family Court. Justice Asher quashed the decisions made by the Family Court on the grounds Mr Zhao had not been given an adequate opportunity to be heard and the existence of the undertaking and lien had not been brought to the attention of the Family Court.[4]
[6] In his decision, Asher J recorded that during the course of the hearing, it had been agreed by counsel he should direct payment of half of the money less the unpaid legal fees to Ms Chen’s new lawyers and discharge Mr Zhao from his undertaking in respect of the monies transferred.[5] Orders were made accordingly.
[7] In a separate costs decision, Asher J recorded that Ms Chen was entitled to the monies released and that the background procedural tangle had left her with little alternative but to oppose the judicial review proceeding.[6] If she had not done so, given the “unbending position” of Mr Zhao at that stage, the result would have been that the monies to which she was entitled and needed could have been tied up indefinitely. Having regard to that background, the Judge said Ms Chen had acted reasonably in electing to defend the proceeding.
[8] Justice Asher then went on to state that, had it not been for the sensible compromise reached during the course of the hearing, the relief he granted Mr Zhao may well have been significantly qualified, which in turn would have warranted a partial award of costs against Mr Zhao.[7]
[9] The Judge concluded that, while he could not ignore the fact Mr Zhao had been successful, equally he could not ignore the merit of Ms Chen’s claim to have her monies released to her and the fact the ultimate decision was a significant practical compromise.[8] In those circumstances, the fair solution was to make a modest award for costs in the company’s favour, but one that was “considerably less” than full costs.
[10] It is this costs decision that the company and Mr Zhao now appeal. The Notice of Appeal states they seek an order reversing the High Court judgment and granting costs in the sum of $18,627.50 plus $1,050, which it is said was the amount of costs originally sought in the High Court. It is not clear how that figure has been calculated.
Security for costs and the Registrar’s decision
[11] On 2 September 2015 security for costs was set at $6,600.
[12] The appellants then applied to have security dispensed with under r 35(6)(c) of the Court of Appeal (Civil) Rules 2005. The application was made on two grounds:
- (a) It would be unfair to order security when Ms Chen is resisting paying the costs that were awarded in the High Court.
- (b) Instead of paying security, Mr Zhao was prepared to give an undertaking that “the appellant will pay any reasonable costs awarded against it should it lose this appeal (and any subsequent appeals)”.
[13] The application for dispensation was opposed by Ms Chen, who made her own application that security be increased. The first respondent, the Family Court, abided the decision of the Court.
[14] In a decision delivered on 13 November 2015, the Registrar declined both applications and ordered the appellants to pay security for costs in the sum of $6,600 by 11 December 2015. The appellants then filed an application for review of this decision. Ms Chen has not sought review of the decision declining to increase the security for costs.
Analysis
[15] Counsel for the appellants, Mr Deliu, advanced several arguments in support of the application for review. I now address each in turn.
The Registrar made an error of law in applying an exceptional circumstances test
[16] In her decision, the Registrar referred to the Supreme Court decision of Reekie v Attorney-General as authority for the proposition that before security may be dispensed with there need to be exceptional circumstances because security for costs is the norm.[9] The Registrar cited in support two passages from Reekie.[10]
[17] Mr Deliu submitted the “exceptional circumstances” test was a test developed by the Court of Appeal that was not endorsed by the Supreme Court in Reekie. Therefore, in his submission, the Registrar made an error of law and applied the wrong test.
[18] I accept that one of the passages cited by the Registrar is simply the Supreme Court’s summary of the approach taken by the Court of Appeal.[11] The Supreme Court did not say in the passage that it endorsed the Court of Appeal’s approach. However, Mr Deliu’s argument overlooked the second passage cited in the Registrar’s footnote. In that passage, the Supreme Court stated:[12]
In the vast majority of cases security is either not required (because the appellant is legally aided) or, alternatively and more commonly, provided. For this reason, cases where security is dispensed with are necessarily exceptional. But this does not mean that an impecunious appellant must show an exceptionally strong case — or anything of that sort — to warrant dispensation. Subject to that possible caveat, the principles as they have been applied since 2005 generally appear unexceptionable.
[19] In my view, the Registrar’s reference to exceptional circumstances is entirely consistent with Reekie and also consistent with post-Reekie decisions of this Court.[13] At no stage did the Registrar require the appellants to show an exceptionally strong case. Further, at the outset of the Registrar’s analysis, she correctly recognised, in accordance with Reekie, that the general test is whether “it is right to require the respondent to defend the judgment under challenge without the usual protection as to costs provided by security”.[14]
[20] I am satisfied the Registrar correctly directed herself in terms of the relevant legal principles applying to dispensation cases.
The Registrar should not have given the benefit of usual security to a litigant who is breaching a court order
[21] As mentioned, Ms Chen has not paid the costs of $4000 awarded by Asher J to the appellants. It seems her refusal is due to other ongoing disputes between her and Mr Zhao.
[22] I agree with the Registrar that the fact of non-payment does not, of itself, disentitle Ms Chen to the usual protection of security for costs in this Court. The appellants’ appropriate course of action is to enforce the costs judgment in the High Court. As also noted by the Registrar, this is not a case where the debt owing by Ms Chen is responsible for the appellants being unable to pay security. There is no suggestion the appellants are impecunious. I note too that the amount owing by Ms Chen under the High Court judgment is less than the likely costs of this appeal.
The Registrar wrongly assessed the merits of the appeal
[23] The Registrar assessed the merits of the appeal as being “modest at best”.
[24] Mr Deliu submitted this assessment was flawed because the Registrar failed to take into account “the complete randomness” of the amount of the costs ordered by Asher J and because the Registrar considered it a weak ground of appeal that Asher J had failed to take into account the appellants’ willingness to enter into mediation with Ms Chen. Mr Deliu described the Registrar’s analysis of the second point as “irrational” because at the same time the Registrar considered Asher J had been entitled to take into account pre-litigation conduct.
[25] I do not accept those submissions. The appeal is an appeal against the exercise of a discretion and Asher J’s decision was carefully reasoned. In my assessment, the appellants face considerable difficulties in seeking to have it overturned.
[26] Justice Asher was not made aware of any mediation proposal. Apparently, it was a New Zealand Law Society initiative in late 2014 following a complaint made by Ms Chen to the Law Society about the level of Mr Zhao’s fees, his claiming of a lien and his refusal to release files to her new solicitors. Mr Zhao agreed to mediate, Ms Chen did not. The mediation was obviously intended to cover a range of matters and it pre-dated both the Family Court orders and the judicial review proceedings. In those circumstances, I consider it a weak argument that Asher J should have taken it into account had it been drawn to his attention.
[27] I also consider it a weak argument the Judge should have ignored the background “procedural tangle”. An argument that the focus should have been solely on the outcome of the proceeding also overlooks the significance of the compromise made during the course of the hearing. Without that compromise, Mr Zhao would not have wholly succeeded.
The Registrar was plainly wrong in refusing to dispense with security on the solicitor’s undertaking alone
[28] The Registrar noted the undertaking, but held that a solicitor’s undertaking was not a substitute for payment of security.
[29] In contending this was plainly wrong, Mr Deliu emphasised the special status of a solicitor as an officer of the Court.
[30] I note that Mr Zhao’s undertaking is expressed as covering only the payment of an award of “reasonable” costs. That suggests he is somehow reserving to himself the right to challenge the reasonableness of any award made by this Court, which is unsatisfactory.
[31] In any event, I agree with the Registrar that the undertaking is not a substitute for actual payment of security. An undertaking still needs to be enforced.
Conclusion
[32] In my view, none of the grounds of review has merit. The Registrar has not erred and having considered the matter afresh I have reached the same outcome. There are no exceptional circumstances and the appeal raises no issue of public interest. It is a weak appeal. The amount at stake is very modest and likely to be exceeded by the costs of the appeal. The appellants are not impecunious. The offer of an undertaking and the fact Ms Chen is in breach of the costs order are not sufficient grounds to justify dispensing with security.
[33] The application for review of the Registrar’s decision refusing to dispense with security for costs is accordingly declined.
[34] Security for costs in the sum of $6,600 must be paid into Court within 20 working days of the date of this decision.
Solicitors:
Amicus Law,
Auckland for Appellants
Crown Law Office, Wellington for First
Respondent
Henley-Smith Law, Auckland for Second Respondent
[1] Richard Zhao Lawyers Ltd v Family Court at Auckland [2015] NZHC 1837 [Costs decision].
[2] Chen v Wang [2015] NZFC 10786.
[3] Chen v Wang [2015] NZFC 3330 at [22].
[4] Richard Zhao Lawyers Ltd v Family Court at Auckland [2015] NZHC 983.
[5] At [53].
[6] Costs decision, above n 1, at [6].
[7] At [8].
[8] At [9].
[9] Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737.
[10] At [27(c)] and [28].
[11] At [27(c)].
[12] At [28] (emphasis added).
[13] See, for example, White v Lynch [2015] NZCA 376.
[14] Reekie v Attorney-General, above n 9, at [21].
NZLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.nzlii.org/nz/cases/NZCA/2015/596.html