HONG v DELIU [2016] NZCA 75

HONG v DELIU [2016] NZCA 75 [16 March 2016]IN THE COURT OF APPEAL OF NEW ZEALANDCA425/2015[2016] NZCA 75BETWEEN BOON GUNN HONGAppellantAND FRANCISC CATALIN DELIURespondentHearing: 10 March 2016Court: Kós, Keane and Dobson JJCounsel: Appellant in personRespondent in personJudgment: 16 March 2016 at 3.00 pmJUDGMENT OF THE COURTA The appeal is allowed and the costs order made in the High Court is quashed.B The appellant is instead to pay costs in the substantive judicial review of 50 per cent of both category 2 band B costs and the disbursements fixed by the Registrar.C No costs order in this Court is made.____________________________________________________________________REASONS OF THE COURT(Given by Kós J)[1] The question in this appeal is when and to what extent costs may be ordered on a judicial review against a defendant who abides the decision of the High Court.Background[2] Mr Deliu and Mr Hong are both solicitors practising in Auckland. There is some animosity between them. This resulted in Mr Deliu issuing legal proceedings in defamation against Mr Hong.1 Mr Hong then wrote a letter to Mr Deliu's counselthreatening to complain about them to the Law Society. Mr Deliu objected to the terms of that letter. The complaint to the Law Society ended up being made by Mr Deliu.[3] The circumstances are laid out in the substantive judgment of Andrews J underlying this appeal.2 After a tortuous process, the Lawyers and Conveyancers Disciplinary Tribunal concluded that Mr Hong had used a threat to complain to the Law Society for an improper purpose. But it did not amount to obstructing, preventing or defeating the course of justice for the purposes of r 2.2 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008. It concluded also that Mr Hong had acted unprofessionally in respect of some correspondence. But it did not find that the breaches had sufficient seriousness to amount to misconduct for the purpose of s 7(1)(b)(ii) of the Lawyers and Conveyancers Act 2006. It dismissed the charges.[4] Mr Deliu then applied for judicial review of the Tribunal's decision todismiss the charges. The Tribunal was first defendant; Mr Hong the second. Bothdefendants abided the High Court's decision. Neither appeared.[5] Mr Deliu's first ground was that the Tribunal had proceeded on a mistake of fact because Mr Hong had misled it as to his previous disciplinary history. Alternatively, that the Tribunal had failed to take his previous disciplinary historyinto account. It is convenient to set out [17] of Andrews J's substantive judgment:This submission was based on a statement made by Mr Hong in his affidavit in response to the charges against him, sworn 22 January 2013, and repeated in his written and oral submissions to the Tribunal:1 See for example Deliu v Hong HC Auckland CIV-2010-404-6349, 21 December 2011; Deliu v Hong [2013] NZHC 735; and Deliu v Hong [2013] NZHC 736.2 Deliu v Hong [2015] NZHC 492 at [3]–[9].Since 1992 when I started in sole practice I have never had a single complaint filed by a client against me. The Law Society can bear testimony to that.The Tribunal referred to this statement in its decision. It said:His evidence also noted that in his many years of practice this was his sole indiscretion resulting in disciplinary charges.[6] In fact:(a) a complaint by a client of Mr Hong had been filed with the Law Society in February 2005 (although that complaint was later withdrawn);(b) two clients of other solicitors had filed complaints against him in 1998 and 2001 (but no disciplinary findings against Mr Hong resulted); and(c) 18 other complaints had been filed by other practitioners (four of which resulted in adverse disciplinary findings against Mr Hong).[7] Andrews J concluded:3Mr Hong's statement was, on the face of the evidence incorrect. Iwould not be prepared to find that Mr Hong misled the Tribunal. However, it is evident that the Tribunal placed some weight on the charge before itbeing Mr Hong's "sole indiscretion resulting in disciplinary charges" inreaching its conclusion that the charge of misconduct was not proved. It did so under a mistake of fact.[8] Andrews J also held the Tribunal erred in law by not considering:4(a) amending the charge to one under s 7(1)(a)(i) of the Act; and(b) whether a charge of unsatisfactory conduct under s 12(c) of the Act should be considered in the alternative.Other grounds advanced by Mr Deliu were dismissed by Andrews J.3 At [22].4 At [23]–[28].[9] The Judge quashed the Tribunal's decision. It is clear that in doing so sheconsidered the errors noted at [8] more significant than the mistake noted at [7].5The charge against Mr Hong was remitted to the Tribunal for reconsideration. She reserved costs and invited memoranda.Costs[10] As noted earlier, neither defendant had appeared. Both had abided theCourt's decision. Mr Hong advises that he had "filed at the outset, a notice of appearance reserving rights (ie as to costs) together with a memorandum ofundertaking to abide by the appellate Court's decision". The reference to "appellate Court" is a reference to the High Court on review.[11] Mr Deliu did not seek costs against the Tribunal. He took the view that such costs would not be available in light of the decision in Coroner's Court v Newton.6He did however seek costs against Mr Hong. He submitted that Mr Hong was"eminently responsible for this entire train of litigation. Had he been honest with thesecond defendant in 2013 these proceedings would never have been necessary."[12] Mr Hong filed a memorandum in response. He referred to a separate 2014 decision of Gilbert J on appeal from a penalty imposed by the Tribunal in other disciplinary proceedings against Mr Hong.7 In the course of that judgment Gilbert J had reviewed Mr Hong's disciplinary record. In relation to the 2005 clientcomplaint, he noted that:8Mr Hong appears to have made an honest mistake in stating that no client had ever complained about him. The Tribunal should not have taken thisinto account when fixing the penalty Andrews J appears to have borne that in mind in her conclusion quoted at [7] above.5 At [41].6 Coroner's Court v Newton [2006] NZAR 312 (CA).7 Hong v Auckland Standards Committee No 3 [2014] NZHC 2871. Gilbert J reduced the penaltyimposed by the Tribunal against Mr Hong from 10 months' to four months' suspension frompractice.8 At [35].[13] Mr Hong's costs memorandum did refer to his abiding the Court decision.He said he did so because he was "unfortunately just too tied up time wise to be able to appear for this application". He did not raise any suggestion that the fact thathe abided the result meant he was not liable for costs. Nor did he discuss the costs principles which have occupied us in this appeal.[14] In a short costs judgment Andrews J concluded that Mr Hong should pay costs to be Mr Deliu on a category 2 band B basis, together with disbursements fixed by the Registrar.9 Understandably given Mr Hong's focus in his memorandum, theJudge did not consider the issue posed at [1].Appeal[15] The notice of appeal filed by Mr Hong defies easy summation, running as it does to several pages and advancing a number of grounds that are more in the nature of judicial review than appeal. Essentially it says that the Judge was wrong to awardcosts when he had abided the outcome and was "not at fault in any way" in the errorsmade by the Tribunal.[16] In a memorandum regarding timetabling of the appeal, filed on 14 September2015, Mr Hong advised that his appeal "relates to one sole issue": whether costs can be awarded when I had abided by the lower Court'sdecision and when I had not committed any perversion of justice offences.As we will demonstrate shortly, the threshold for the awarding of costs against anabiding party is not and never has been as high as that posed in Mr Hong's suggestedissue.10 Accordingly, the answer to that issue must be yes.[17] Understandably Mr Deliu rather seized on this self-defeating proposition at the hearing of the appeal as offering him a lay down misère. We are satisfied, however, that the appeal should be dealt with on its real merits. That is, whether in this case costs should have been awarded against Mr Hong. Mr Deliu argued this9 Deliu v Hong [2015] NZHC 1635 at [3].10 See at [26] below.broader proposition in the alternative. He is not prejudiced by the real merits of the appeal being addressed properly.Submissions[18] Mr Hong submitted that Andrews J should have taken greater account of Gilbert J's conclusion that Mr Hong had not deliberately misled the Tribunal as tothe 2005 client complaint. The costs decision was unreasoned. It simply imposed the whole costs burden on Mr Hong when he had abided the outcome and any error made by him was only one of three reasons the Judge gave for quashing the Tribunal decision.[19] Mr Deliu submitted that Gilbert J's decision was before Andrews J; shereferred to it in her substantive judgment.11 The costs judgment was reasoned, albeit briskly. In any case, Mr Deliu said, citing Manukau Golf Club Inc v Shoye Venture Ltd, it did not need to be reasoned where costs were awarded — as opposed to denied.12 Mr Hong had not taken the argument that he should not be liable at all for costs because of his stance in abiding. The costs decision was an exercise of discretion. It was not plainly wrong.Discussion[20] We first consider principle and then turn to its application in this case. As to principle we make six points.Principle[21] First, Andrews J's costs judgment was a discretionary decision. According toconventional appellate principles the appellant must show the Judge has applied principle incorrectly, taken into account an irrelevant matter, ignored a relevant matter or is plainly wrong.1311 Deliu v Hong, above n 2, at [38].12 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [16].13 D M Roberts Ltd v Mudgway [2013] NZCA 187 at [66].[22] Secondly, it is correct that in Manukau Golf Club Inc v Shoye Venture Ltd the Supreme Court said that a costs judgment need not include reasons where (1) simply applying the fundamental principle that costs follow the event and (2) awarding costs within the normal range applicable.14 It went on to say "It is only when somethingout of the ordinary is being done that some explanation, which may be brief, shouldbe given."15 This is not to be taken, however, as a wholly comprehensive statement of principle. It is plainly applicable in a case where the party liable to pay costs has participated in the process through to (adverse) judgment. It does not however cover the situation where a party has not.[23] Thirdly, a defendant joined in a proceeding has, essentially, three options: (1) to defend, (2) to abide (either conditionally or unconditionally)16 or (3) to admit the cause of action.17 These have different costs consequences. Costs incurred (and recoverable) by the plaintiff will be greater in the former case than the latter two. A defendant who abides still puts the plaintiff to the cost of a trial, albeit a less strenuous one. A defendant who admits averts that cost for the plaintiff judgment in such a case may be entered by formal proof.18 Where either the second or third option has been taken, the course is out of the ordinary. Even though the level of costs will be less than in the first instance, a Court will still need to consider, however briefly, whether it is just that the usual scale measure of costs should be visited on that defendant.[24] Fourthly, where there is more than one defendant a Court will need to consider how costs should be allocated between them. While the default position under r 14.14 of the High Court Rules is joint and several liability amongdefendants, that is subject to the Court's overriding discretion. In our view, wherethe case is out of the ordinary in some significant way, consideration must be given14 Manukau Golf Club Inc v Shoye Venture Ltd, above n 12, at [16].15 At [16].16 For example, and as in the present case, the defendant may reserve the right to be heard on some aspect of the case — in particular on costs.17 See High Court Rules, r 15.16(1).18 Rule 15.16(3).to whether to alter that burden.19 In particular, where costs are not sought against one unsuccessful defendant, it does not follow that the other should be liable for the whole scale measure of costs. Likewise where a defendant has taken a reduced part in opposing judgment such as by abiding the outcome or admitting the cause of action.[25] Fifthly, such principles have been applied in a number of High Court decisions where a reduced share of costs has been ordered against a party abiding the outcome. In Kawarau Jet Services Holdings Ltd v Queenstown Lakes District Council French J (after referring to an earlier High Court decision) observed:20In so far as these comments could be interpreted as meaning that a person who abides the decision of the Court can never be liable for any costs, I must respectfully disagree. That would be too absolute a proposition. Ultimately, the task of the Court is to make an assessment of overall justice as between the particular parties. On the facts of this case, where the Council made a very fundamental and serious error which necessitated the issuing of proceedings, I consider the council should make a contribution. However, because it responsibly did not defend the proceeding, its liability should be limited to 20% of the costs and disbursements, excluding the costs of the experts.The other defendant, which had actively defended, was to be responsible for the other 80 per cent, and the whole of the experts costs. A broadly similar approach was taken by Gendall J in Sutton v Canterbury Regional Council.21 In each of those cases the council defendants were found to have erred, justifying the imposition of costs against them. In a third case, Wang v North Shore District Court (No 3), Woolford J reviewed these authorities and observed:22The inference from [these] cases is that where the defendant abides theCourt's decision and does not adopt an unreasonable position, they will notnecessarily be required to bear the full costs of court proceedings.19 Gino Dal Pont Law of Costs (3rd ed, LexisNexis Butterworths, Australia, 2013) at [11.2]–[11.9]. See as examples Narayan v Arranmore Developments Ltd [2011] NZCA 681, (2011) 13 NZCPR 123 at [53]–[54]; Commissioner of Inland Revenue v Muir [2015] NZHC 1573, (2015) 27 NZTC 22-014 at [16]–[18]; Walker v Gibbston Water Services Ltd [2014] NZHC 2250 at [16]; andPegasus Group Ltd v QBE Insurance (International) Ltd HC Auckland CIV-2006-404-6941, 24 September 2010 at [46].20 Kawarau Jet Services Holdings Ltd v Queenstown Lakes District Council HC Invercargill CIV- 2008-425-518, 19 May 2009.21 Sutton v Canterbury Regional Council [2015] NZHC 1000 at [43]. The Council in that case washeld liable for a reduced 20 per cent share of all costs and disbursements, including experts' fees.The second respondent was liable for the other 80 per cent.22 Wang v North Shore District Court (No 3) [2015] NZHC 1611, [2015] NZAR 1678 at [26].In that case the abiding defendant's error was not sufficiently substantial to warrant acontribution to the plaintiff's costs.[26] Sixthly, it follows from the discussion of the preceding cases that the issue posed by Mr Hong at [16] above has to be answered in the affirmative. A defendant abiding the outcome may indeed be liable for costs where it is just that it bear someshare of the plaintiff's costs. The threshold for liability is not so high as to requiresome perversion of justice first. Error causing a need to issue proceedings tovindicate the plaintiff's rights will suffice to expose an abiding defendant to some liability for costs. The extent of contribution required will depend on the extent ofthe original error and the reasonableness of the defendant's conduct thereafter.Application[27] Applying those principles in this case we observe:(a) none of those principles were articulated clearly in the memoranda the Judge received. The omission of them from the costs judgment is entirely understandable, therefore;(b) the distinction between abiding outcome and admitting the cause of action had not occurred to Mr Hong until we raised it with him at the hearing;(c) Mr Hong's statement to the Tribunal was factually incorrect and contributed to the Tribunal's three errors. The resultant error was theleast material of the three.23 However we bear in mind that Mr Hong was a necessary defendant and that his conduct as a whole had been found by the Tribunal to have been improper and unprofessional. The remaining errors by the Tribunal related to its failure to consider disciplinary consequences below the level of s 7(1)(b)(ii) misconduct;23 See [9] above.(d) in those circumstances it was appropriate that Mr Hong contribute toMr Deliu's costs in vindicating his rights as complainant in thejudicial review proceeding;(e) given the limited effect of Mr Hong's error before the Tribunal, his conduct thereafter in abiding the outcome in the High Court and the fact that costs were not sought against the Tribunal, we consider Mr Hong should not have to shoulder the whole of Mr Deliu's costs;(f) the proportion of costs Mr Hong should bear is higher than that imposed on the abiding defendants in Kawarau and Sutton; and(g) in our view a contribution of 50 per cent of category 2 band B costs and the disbursements fixed by the Registrar would have been appropriate in this case.[28] Mr Hong must take some responsibility for the way in which matters concerning costs developed before the trial Judge. Costs in this Court will therefore lie where they fall.Result[29] The appeal is allowed and the costs order made in the High Court is quashed.[30] The appellant is instead to pay costs in the substantive judicial review of 50 per cent of both category 2 band B costs and the disbursements fixed by the Registrar.[31] No costs order in this Court is made.