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Hsu v Mahoney [2022] NZHC 372 (8 March 2022)

Last Updated: 15 March 2022


IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2017-409-000100
[2022] NZHC 372
BETWEEN
PI-HUI BEATRICE TSAI HSU
First Plaintiff
AND
KENNETH TSAI
Second Plaintiff
AND
MARGARET ANN MAHONEY and GRAHAM PAUL MCQUEEN
First Defendants (Discontinued)
AND
BUSHNELL INVESTMENTS LIMITED
(formerly named BUSHNELL BUILDERS LIMITED)
Second Defendant
AND
CHRISTCHURCH CITY COUNCIL
Third Defendant (Discontinued)
AND
LANCE PHILIP AUSTIN
Fourth Defendant
AND
BUSHNELL BUILDERS LIMITED
Fifth Defendant
Hearing:
On the papers
Appearances:
R G Smedley and T D Grimwood for Plaintiffs
S P Rennie and A G M Whalan for Second, Fourth and Fifth Defendants
Judgment:
8 March 2022


JUDGMENT OF JUSTICE DOOGUE

(Costs)







HSU v MAHONEY (COSTS) [2022] NZHC 372 [8 March 2022]

This judgment was delivered by me on 8 March 2022 at 9.00 am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Introduction


(a) the building contract by failing or neglecting to correct defects during the liability period;

(b) the warranty in the building contract by failing or neglecting to remedy defective tanking;

(c) its duty of care to the plaintiffs; and

(d) both the pleaded “RW Agreement” and the “CRMBA Agreement”.

(a) owed the plaintiffs a duty of care to ensure the remediation attempts he controlled on behalf of BIL were carried out to the standard of compliance with the Building Code;

(b) was negligent and breached the duty of care he owed to the plaintiffs; and

(c) exacerbated the emotional distress and harm suffered by the plaintiffs.
$25,000 to each of the plaintiffs.

1 Hsu v Mahoney [2021] NZHC 1611.


(a) some relatively minor divergence on scale costs to be applied;

(b) whether or not the plaintiffs should be entitled to a 25 per cent uplift in costs from 5 December 2019 to 4 August 2021;

(c) whether the plaintiffs should be entitled to a 75 per cent uplift in costs from 4 August 2021;

(d) whether there should be a departure from the principle that parties liable for costs will be jointly and severally liable; and

(e) whether the plaintiffs should pay costs to BBL2.

Divergence on scale costs to be applied

2 Hsu v Mahoney [2021] NZHC 2708.

Costs against Mr Austin

Should there be a 25 per cent uplift from 5 December 2019?

Plaintiffs’ submissions


(a) failing to comply with directions of the Court;

(b) taking and pursuing arguments which lacked merit; and

(c) failing, without reasonable justification, to admit facts and evidence or to accept legal argument.

(a) the remaining defendants unsuccessfully opposing the plaintiffs’ interlocutory application for joinder of BBL2, notwithstanding that they had no standing to do so;

(b) failing to comply with timetabling directions;

(c) abandoning their limitation defence on the eve of the trial; and

(d) unsuccessfully seeking adjournment of the proceedings on two separate occasions.

Defendants’ submissions

Discussion

Should there be a 75 per cent uplift from 4 August 2021?

Plaintiffs’ submissions



3 Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011 at [28], citing Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24 NZTC 24,500 at [165].

Defendants’ submissions

Should Mr Austin be jointly and severally liable for costs awarded to the plaintiffs?

Plaintiffs’ submissions


(a) the plaintiffs should be entitled to costs as against BIL and Mr Austin; and

(b) BIL and Mr Austin should be liable for such costs jointly and severally.

... While the default position under r 14.14 of the High Court Rules is joint and several liability among defendants, that is subject to the Court’s overriding discretion. In our view, where the case is out of the ordinary in some significant way, consideration must be given to whether to alter that burden.

...

[22] In summary, unsuccessful parties are prima facie jointly and severally liable. That rule may be varied because the ultimate task of the Court is to make an assessment of overall justice as between the particular parties, in the particular circumstances. Relevant considerations include whether and in what manner the parties participated in the proceedings, the extent to which one party was in error, and what measure of reliance was placed on the error by the other party.





4 High Court Rules, r 14.2(1)(a).

5 High Court Rules, r 14.14.

6 Hong v Deliu [2016] NZCA 75, [2016] NZAR 667 at [24] (footnote omitted).

7 Hong v Deliu, above n 3 at [24].

8 Palmer v Hewitt Building Ltd [2021] NZHC 2435 at [3]–[4].

9 Rochdale Precinct Society Inc v Christchurch City Council [2018] NZHC 1708.


(a) BIL and Mr Austin were found to have breached duties owed to the plaintiffs and so both substantially contributed to the harm caused to the plaintiffs;

(b) BIL and Mr Austin were found to be concurrently liable for general damages;

(c) the remaining defendants:

(i) were all represented by Rhodes & Co;

(ii) relied on the same pleadings which were drafted as single documents;

(iii) relied on the same three witnesses, including Mr Austin who gave evidence on behalf of the remaining defendants;

(iv) actively participated in the proceedings, in that none of the remaining defendants participated in a reduced or diminished capacity (for instance by making any significant admissions in respect of, or declining to defend, any aspect of the plaintiffs’ claims); and

(v) otherwise co-ordinated their defences of the proceeding such that the remaining defendants cannot be said to have operated separately or individually;
(d) the legal and factual issues as between the remaining defendants were all largely common, or otherwise overlapped significantly, and the vast majority of the evidence and hearing time was dedicated to the defective tanking issue, which was accepted by the remaining defendants, and whether it had been effectively remediated, which was disputed by all of the remaining defendants;

(e) costs (uplifted by 25 per cent) were awarded against the remaining defendants jointly by Associate Judge Lester in the minute dated 23 March 2020; and

(f) the extent of Mr Austin’s control and influence over the other remaining defendants in these proceedings should weigh in favour of joint liability for costs.

(b) the ultimate question in any exceptional case is whether in all the circumstances it is just to make the order, thereby requiring a fact specific inquiry;

(c) as a general rule, third party litigation funders are only liable for costs where they not only fund proceedings but substantially control it or “at any rate [are] to benefit from them” – that is because the funder is gaining access to justice for its own purposes and is in effect the real party to litigation;


10 S H Lock (NZ) Ltd v New Zealand Bloodstock Leasing Ltd [2011] NZCA 675 at [14].

11 Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2 [2004] UKPC 39, [2005] 1 NZLR 145 at [25].

(d) the most difficult cases are those where non-parties fund receivers or liquidators in litigation which is designed to advance the funders’ own financial interests – in that case, again as a general rule, the funder pursuing its own interests should not be able to escape without risk to liability for costs if the proceeding fails.


(a) Mr Austin:

(i) was one of two directors of BIL and a shareholder;

(ii) as a shareholder of BIL, Mr Austin would have benefitted had BIL either successfully defended these proceedings or succeeded in its counterclaim;

(iii) was sole director and majority shareholder of BBL2; and

(iv) gave evidence on behalf of the remaining defendants and was the only witness of fact of the remaining defendants;

(b) the remaining defendants were all represented by Rhodes & Co, relied on the same pleadings which were drafted as single documents and relied on the same three witnesses;

(c) in answer to the question, “Did Mr Austin exert a sufficient degree of control over the relevant acts or omissions [of BIL]?” the Court’s judgment noted:12

12 Hsu v Mahoney, above n 1.

[219] I find Mr Austin’s evident control of the remediation attempts, personal actions in undertaking water testing and repairs, and reassurances given to Mr Mahoney and the Tsais mean he owed a duty.

...


and;

(d) counsel for BIL has indicated that BIL will likely be liquidated and so it is unlikely to be able to fully satisfy any costs award.

Defendants’ submissions

[26] In the present case, however, the only party to have succeeded by any “realistic appraisal” were the appellants. It is true that they did not succeed to the full extent of their claim but only to roughly half that extent, yet success on more limited terms is still success. We do not therefore see a proper basis upon which the usual rule that the party who fails with respect to a proceeding should pay costs to the party who succeeds should not apply. That said, it is appropriate that the costs ultimately awarded to the appellants should be reduced in accordance with r 14.7(d) because, although the appellants succeeded, the time and resources necessary for the respondent to meet ultimately unsuccessful arguments significantly increased its costs. Like Katz J, we assess that increase at around 100 per cent or roughly a doubling of effort and time. A reduction in entitlement by half is therefore appropriate.

13 Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379.

$50,000.00 in the context of High Court litigation is a relatively nominal sum. In addition, the core argument against Mr Austin (his liability in terms of the remedial costs of the wall/tanking) was unsuccessful and this issue comprised the majority of the time and expense of the case.

Discussion





14 Body Corporate S73368 v Otway [2018] NZHC 1095 at [8].

Scale costs

Joinder of BBL2

15 Hsu v Mahoney, above n 1, at [93] and [232].

$50,743.00 owing by the plaintiffs to BBL2.

Result

$107,551.26.
$16,914.33.




Doogue J





Solicitors:

Anthony Harper, Christchurch Rhodes & Co, Christchurch


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