Lee v Gao [2018] NZHC 1345 (8 June 2018)

Last Updated: 26 July 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2015-404-001103 [2018] NZHC 1345

BETWEEN	YOON LEE Plaintiff
AND	ZHIHONG GAO AND LIN GE First Defendants
AND	JOHN CARTER AND BRENT OʼCALLAHAN Second Defendants
AND	OFFICIAL ASSIGNEE Third Defendant

Hearing:	7 August 2017
Appearances:	Plaintiff in Person M OʼBrien for the First Defendants A Challis and K Robinson for the Second Defendants No appearance for Third Defendant
Judgment:	8 June 2018

JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 8 June 2018 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

McElroys, Auckland Hesketh Henry, Auckland Y Lee, Auckland

LEE v GAO [2018] NZHC 1345 [8 June 2018]

[1] On 11 April 2017 I struck out the plaintiff’s claims against the first and second defendants. This decision deals with the outstanding costs applications that they have made. Both seek indemnity costs (or at least increased costs) as follows:

(a) The second defendant seeks indemnity costs of $43,424.50 (excluding GST) for its actual costs of and incidental to commencing its defence and its successful strike out application; and in the alternative, scale costs of $14,718 plus an uplift of 50% ($22,077). It also seeks disbursements of $2,240.30.

(b) The first defendants seek indemnity costs of $22,782 (excluding GST) for its actual costs of and incidental to commencing its defence and its successful notice of appearance in support of the second defendant’s strike out application; and in the alternative, scale costs of $13,380 plus an uplift of 50% ($20,070). It also seeks disbursements of $546.19.

[2] There is no dispute that as successful parties, these defendants are prima facie entitled to scale costs under the High Court costs regime for a Category 2 proceeding; but they have the onus of satisfying the court that increased or indemnity costs are warranted. They point to my finding that the plaintiff’s claims against these defendants were wasting the Court’s time and subjecting them to ongoing hardship and submit that this is a clear case for indemnity or increased costs. The plaintiff takes a very different position and argues that if costs any costs award should be for reduced costs, assessed on a Category 2 Band A basis. He relies (it seems) on the query I have raised as to whether the defendants’ arguments for strike-out involved “repetition” of arguments presented in earlier proceedings and whether that should be reflected in reduced costs. The query was implicit in paras [34] and [35] of my judgment, which I reproduce (together with para [33]) here:

[33] The claims against the first and second defendants are struck out as an abuse of process. They are wasting the Court’s time and unnecessarily subjecting these defendants to ongoing hardship.¹ It is quite clearly in the public interest that there should be an end to the claims against them, their strike-out applications being wholly justified.

¹ At [20](a).

[34] I turn then to the issue of costs. The first and second defendants seek indemnity costs on the proceeding (including on their applications). Mr Lee says he has already suffered in excess of $200,000 in indemnity costs over this long-winded litigation. It is regrettable to impose more by way of costs on him, but by dragging the defendants into yet another proceeding, Mr Lee has given the Court no choice. He would be wise to let this be the last time.

[35] As costs follow the event, the first and second defendants are entitled to costs under the statutory costs regime. Quite clearly they are certainly entitled to scale costs on a 2B basis, but they seek indemnity costs. Whether or not there is a case for increased or indemnity costs is not something I presently express a view on, but it may well be that the arguments they have presented in support of strike-out in this proceeding are simply a repetition or refinement of the arguments presented in earlier proceedings, and in the circumstances the defendants may be content with 2B costs. If they wish to pursue increased or indemnity costs then they are to file and serve brief memoranda within 10 working days setting out their calculations of 2B costs, and for their actual costs in the proceeding supported by reasons why they consider such costs are justified. Mr Lee will have 10 working days to file and serve a memorandum in response.

[3] The plaintiff also argues that indemnity costs would be excessive and unreasonable. He submits that the court did not find he was guilty of flagrant misconduct, and says he believed he was seeking an answer to a new point of law of genuine public interest.

Discussion

[4] The defendants rely on High Court Rules 14.6(3) and (4). The second defendant (and principal applicant) points to the Court’s discretion in rule 14.6(3) (to award increased costs where a party has pursued an argument that lacks merit) and in r 14.6(4) (to award indemnity costs where a party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing and continuing a proceeding). The first defendants do likewise.

[5] It is difficult not to treat this as case of a plaintiff who has acted vexatiously in commencing and continuing this proceeding. As I set out in my judgment (and I summarise) there have been multiple proceedings, all stemming from one initial District Court decision relating to events in 2005, and culminating in 2016 in the Supreme Court’s advice that it was high time “this long-running saga was brought to an end”. Despite such advice, the plaintiff sought to raise, in yet another guise, the very same issues that had long had their day in Court. He claims there were also
additional matters that had never been dealt and that he was seeking an answer to a new point of law that was not raised in the previous litigation, but as I found, applying Henderson v Henderson,² there was no merit in such contentions.

[6] But there are also other factors that I am satisfied must be weighed in the balance when exercising the court’s discretion to award increased or indemnity costs:

Second defendant’s claim for costs

(a) The grounds for strike-out were straightforward. They were (as one would expect in a Category 2 proceeding) of average complexity of requiring counsel of skill and experience considered average in the High Court.

(b) The issues raised in the strike-out application has been canvassed fully in the earlier litigation between the same parties. They contained little or nothing that was new, as counsel for the defendants were at pains to point out. Indeed, this essential fact lay at the heart of the second defendant’s strike-out application; and it cuts both ways. The application was essentially a re-run of arguments successfully relied on by the defendants in the previous litigation. As unreasonable as it was for him to subject them yet again to further litigation there would have been an inevitable and substantial amount of repetition in their arguments for strike-out when compared with those made earlier. That fact must have provided the opportunity for an economical approach on this occasion to avoid duplication and it counts against increased or indemnity costs.

(c) I accept counsel for the second defendant’s submission that she took the trouble to carefully lay out details of the previous litigation. She was undoubtedly thorough in the way she did this. That involved an element of choice the second defendant was entitled to make, no doubt reflecting the desire to take particular care with the preparation and

² Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100 per Vice Chancellor Sir James Wigram.

presentation of argument; however, the defendant cannot be expected to meet the very substantial costs of what was essentially a “Rolls Royce” job.

First defendants’ claim for costs

(d) The comments I have made about repetition are also apposite to the first defendant’s case as is the additional fact that it did not in fact file a notice of opposition. It filed a notice of support for the second defendant’s application, and as such took a substantially lesser role in argument. Its arguments substantially duplicated those of the second defendant.

[7] Weighing all of these factors I am satisfied that this is not a case where I ought to award indemnity costs (or indeed increased costs). The case is however clearly one where the second defendant is entitled as the successful applicant to 2B costs and disbursements, allowing however for a reduced allocation for the preparation of submissions pursuant to r 14.7. (1 day is allowed). I do not accept the plaintiff’s argument that Band B should not be applied, or that the element of duplication inevitably involved warrants the application of Band A. The first defendants are also entitled to 2B costs, subject however to a reduced allocation (0.5 of a day is allowed) pursuant to r 14.7 for the preparation of submissions, and to reflect the fact that they appeared pursuant to a notice of support and not as separate applicants. (For this I allow 0.2 of a day).

Result

[8] I make orders for costs as follows:

(a) The 2B costs and disbursements claimed in the second defendant’s costs memoranda (subject to the reduced allocations referred to above)
- $13,603 plus disbursements of $2,240.30.
(b) The 2B costs and disbursements claimed in the first defendants’ costs memoranda (subject to the reduced allocations referred to above) -
$10,258 plus disbursements of $546.19.








Associate Judge Sargisson