CAI v THE KUANG (NO 2) TRUSTEE LTD as trustee for the C.K. (No 2) Trust [2020] NZHC 2845 [30 October 2020]

CAI v THE KUANG (NO 2) TRUSTEE LTD as trustee for the C.K. (No 2) Trust [2020] NZHC 2845[30 October 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2020-404-906[2020] NZHC 2845IN THE MATTER of an application to remove a caveat unders 142 of the Land Transfer Act 2017BETWEEN YALI CAIApplicant / RespondentAND THE KUANG (NO 2) TRUSTEE LIMITEDas trustee for the C.K. (No 2) TrustRespondent / First ApplicantAND CONNIE KUANGSecond ApplicantHearing: On the papersAppearances: C Jiang for the Applicant / RespondentR S Pidgeon for the Respondent / First Applicant and SecondApplicantJudgment: 30 October 2020JUDGMENT OF GAULT J(Costs)This judgment was delivered by me on 30 October 2020 at 4:00 pmpursuant to r 11.5 of the High Court Rules 2016.Registrar/Deputy RegistrarSolicitors:Mr C Jiang, Glaister Ennor, AucklandMr R S Pidgeon, Barrister, AucklandMr MSP Pang (respondent's instructing solicitor), Integritas Law, Auckland[1] During the hearing of Mr Cai's originating application for an order removinga caveat lodged by the respondent, The Kuang (No 2) Trustee Ltd, and an applicationby the respondent for an interim injunction on 16 July 2020, the parties reached acompromise. I made orders by consent and, in relation to costs, timetabled directionsfor any party seeking costs to file and serve a memorandum within five working days.1That did not occur, but on 26 August 2020 Mr Cai filed a memorandum seeking costs.[2] Mr Cai seeks costs in relation to the originating application and an earlierfreezing order application made by the respondent and Ms Kuang. Mr Cai seeks costson each application on the basis that he succeeded and r 14.2 of the High Court Rules2016 provides that the party who fails with respect to a proceeding or an interlocutoryapplication should pay costs to the party who succeeds.2[3] In relation to the originating application, Mr Jiang, for Mr Cai, submits thatMr Cai is entitled to indemnity costs on the basis that the respondent has actedfrivolously, improperly or unnecessarily in opposing the originating application, butinstead seeks increased costs under r 14.6(3)(b) on the basis that the respondent hascontributed unnecessarily to the time or expense of the originating application bytaking or pursuing an unnecessary step or argument which lacked merit,3 and byfailing, without reasonable justification, to accept Mr Cai's legal arguments.4 Mr Caiseeks a 50 per cent uplift.[4] In relation to the freezing order application, Mr Jiang submits that therespondent and Ms Kuang have acted frivolously, improperly and/or unnecessarily,but instead of indemnity costs Mr Cai seeks increased costs on the basis that therespondent and Ms Kuang have contributed unnecessarily to the time or expense ofMr Cai's opposition rebutting baseless claims. Again, a 50 per cent uplift is sought.1 Cai v The Kuang (No 2) Trustee Ltd HC Auckland CIV-2020-404-906, minute dated 16 July 2020.2 Rule 14.2(1)(a).3 Rule 14.6(3)(b)(ii).4 Rule 14.6(3)(b)(iii).[5] Mr Pidgeon, for the respondent and Ms Kuang, filed a memorandum attachingcorrespondence between counsel seeking to show that the respondent and Ms Kuanghave attempted to be reasonable. That provoked a further memorandum on behalf ofMr Cai objecting to the inclusion of the email chain on the basis of privilege.[6] The respondent does not oppose 2B costs for the originating application.The disbursements sought are also accepted.[7] In relation to the freezing order application, Mr Pidgeon invites the exercise ofthe Court's discretion under r 14.1 to view it with the application for an interiminjunction. He submits the application for a freezing order was withdrawn solelybecause there was no clear evidence of a threat of dissipation. Although submittingthat costs should lie where they fall, Mr Pidgeon concluded that the respondent andMs Kuang accept they are liable for costs of $1,434 and disbursements of $414.DiscussionWithout prejudice save as to costs privilege[8] I deal first with the inclusion of the email chain. The first email in the chain,from Mr Jiang, was clearly marked 'without prejudice save as to costs'. Mr Pidgeon'sreply was not so marked but it was a direct reply and in context I consider it was senton the same basis. Likewise, Mr Jiang's subsequent reply.[9] Correspondence that is made 'without prejudice save as to costs' is privilegedby definition 'save as to costs'. In the context of a dispute as to costs, I consider that'without prejudice save as to costs' correspondence is only relevant to costs in relationto costs. While the Court has power to award costs in relation to costs, they are unusualand the Court is reluctant to award them.5 Furthermore, costs issues should not beprotracted by way of a two-stage process that defers consideration of costs on costs,including reference to 'without prejudice save as to costs' correspondence, until aftercosts have otherwise been determined.5 Jeffreys v Morgenstern [2013] NZHC 1361 at [40]; and Barry Park Investments Ltd v BodyCorporate Number 95388 [2016] NZHC 1527 at [25].[10] Therefore, insofar as the email correspondence is relevant to the issue of costson costs, I consider it is not privileged and may be taken into account. However, herecosts on costs are not even sought. The email correspondence is therefore irrelevant,and I need not address it further except to note that difficulties may arise when thereis a dispute between counsel as to whether correspondence between themselves isprivileged.Originating application[11] Mr Cai is entitled to costs in relation to the originating application.He succeeded in obtaining an order that the caveat be removed, albeit by consent partway through the hearing.[12] It is unnecessary to consider indemnity costs. Increased costs may be awardedwhere there is a failure by the paying party to act reasonably.6 On an application forincreased costs, the applicant must persuade the Court they are justified. Where theapplication was resolved rather than determined by the Court, it may be more difficultfor the applicant to persuade the Court that the respondent has acted unreasonably andincreased costs are justified.[13] The hearing suggested the respondent's opposition lacked merit. The caveatwas lodged following a decision of the Court in relation to a caveat by a related party,and was arguably an abuse of process. If the matter had proceeded to Courtdetermination and I had reached such conclusions, increased costs would have beenappropriate. However, in the circumstances of the compromise reached at the hearing,I am not persuaded that increased costs are justified.Freezing order[14] As indicated, Mr Cai seeks costs in relation to the abandoned freezing orderapplication but not the compromised interim injunction application. The interlocutoryapplication by the respondent and Ms Kuang (who purported to join the proceedingfor that purpose) was a combined application seeking a freezing order or, in the6 Rule 14.6(3); and Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR400 at [27(b)].alternative, an interim injunction. The freezing order was abandoned in advance ofthe hearing, likely following the realisation that there was insufficient evidence inrelation to the risk of dissipation.[15] Although r 15.23 concerning costs on the discontinuance of a proceeding doesnot apply to interlocutory applications, it may by analogy mean that an applicant whohas abandoned an interlocutory application should pay costs where the Court does notknow what the merits of the respective positions of the parties were and ought not totry to come to a view. Such an approach recognises that, absent some otherexplanation, "a likely explanation for the applicant not proceeding is that it appreciatedthat it was unlikely that its application would prevail".7[16] I consider the likely explanation for the freezing order application notproceeding was that it was appreciated it was unlikely to prevail. The inter-relationship with the interim injunction application, which was resolved by agreementand in respect of which Mr Cai sensibly does not seek costs, means that it might beappropriate for the costs of the abandoned freezing order application to lie where theyfall, but the respondent and Ms Kuang accept they are liable for 2B scale costs of$1,434 and disbursements of $414.[17] I am not persuaded that increased costs are appropriate. Mr Cai had to respondto the application for interim injunction in any event. The only step taken and forwhich costs are sought was the filing of the notice of opposition, which was also acombined notice relating both to the interim injunction and freezing order.Result[18] The applicant is entitled to 2B costs of $11,830.50 and disbursements of $1,711in respect of its originating application.7 MV Celebre Ltd v Airwork Flight Operations Ltd [2015] NZHC 1400 at [13].[19] The applicant is entitled to 2B costs of $1,434 and disbursements of $414 inrespect of the abandoned application for a freezing order.________________________________Gault J