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Liang v Han [2023] NZHC 3404 (29 November 2023)

Last Updated: 14 December 2023

COSTS JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 29 November 2023 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

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

Solicitors:

Russell Legal, Auckland

LIANG v HAN [2023] NZHC 3404 [29 November 2023]

Background

• [1] In a judgment delivered on 8 August 2023, I dismissed Chao Liang’s application under s 143 of the Land Transfer Act 2017 for an order that a caveat over a property at Vaughans Road, Auckland, owned by Yangfeng Han, not lapse.¹

• [2] Mr Han seeks increased or indemnity costs because the caveat was lodged for an improper purpose and with no reasonable cause. Mr Liang opposes an order for costs being made against him.

• [3] Mr Liang applied for the judgment to be recalled. In a judgment delivered on 20 September 2023 I dismissed that application.

Legal principles

• [4] The Court’s jurisdiction to award increased or indemnity costs is derived from r 14.6 of the High Court Rules 2016. Rule 14.6 provides:

14.6 Increased costs and indemnity costs

[...]

(3) The court may order a party to pay increased costs if—

(a) the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i) failing to comply with these rules or with a direction of the court; or

(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

¹ Liang v Han [2023] NZHC 2070.

(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or

(c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or

(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

(4) The court may order a party to pay indemnity costs if—

(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or

(b) the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or

(c) costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or

(d) the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or

(e) the party claiming costs is entitled to indemnity costs under a contract or deed; or

(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

• [5] In the leading case on indemnity costs, Bradbury v Westpac Banking Corp, the Court of Appeal considered that indemnity costs may be ordered where a party has behaved badly or very unreasonably.² The Court listed the circumstances where indemnity costs had been ordered (while not closing the categories), being:

(a) the making of allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud;

(b) misconduct that causes loss of time to the Court and to other parties;

² Bradbury v Westpac Banking Corp [2009] NZCA 234; [2009] 3 NZLR 400 at [27].

(c) commencing of continuing proceedings for some ulterior motive;

(d) doing so in wilful disregard of known facts or clearly established law; or

(e) making allegations which ought never to have been made, or unduly prolonging a case by groundless contentions (the “hopeless case” test).

• [6] Mr Han submits that indemnity costs are justified under High Court Rule 14.6(4)(a) and (f). He submits that in the proceedings Mr Liang and his “translator”, Mr Young, made allegations of fraud, bribery of a public servant, perjury, and dishonesty against Mr Han, counsel for Mr Han, and LINZ, including in open court. Counsel for Mr Han has set out a selection of these allegations in a memorandum of counsel dated 21 August 2023.

• [7] Further, Mr Han submits that Mr Liang made his application for an ulterior motive, to secure Mr Han’s property, from whom Mr Liang claims damages.

• [8] Finally, Mr Han submits that the application was a “hopeless case” from the outset.

• [9] Mr Han seeks indemnity costs in the amount of $84,871, plus disbursements of $3,473.54.

• [10] In the alternative, Mr Han seeks increased costs under High Court Rule 14.6(3), on the basis that Mr Liang took and pursued unnecessary steps by filing and continuing with his application; took and pursued arguments with no merit; and failed without reasonable justification to admit facts, evidence, or accept a legal argument. Mr Han submits that the application was meritless, which alone reaches the threshold.

• [11] Mr Han submits that an uplift of 100% is appropriate, while providing alternative uplifts of 50% or 75%. On a 100% uplift, Mr Han seeks costs of $68,480 plus disbursements of $3,473.54.
• [12] Mr Liang has filed memoranda ostensibly about costs, dated 25 August, 31 August, and 4 October 2023. These memoranda are repetitive, incoherent, involve restatements of the arguments he made at the caveat application, and are materially focussed on attacking Mr Han’s counsel with unsubstantiated allegations that he misled the Court, and filed misleading and forged documentation.

• [13] This is a case where indemnity costs are justified. Mr Liang has behaved badly, and very unreasonably. He has made unsubstantiated allegations of fraud against Mr Han, Mr Han’s counsel, and LINZ personnel. He lodged the caveat, and then applied to sustain that caveat in this Court for an ulterior purpose, namely to secure the property of Mr Han to meet Mr Liang’s claim against him for $2.4 million in damages. As I stated in the judgment, a caveat protects a beneficial estate or interest in land, and is not a tool for a plaintiff to deploy to secure the property of a defendant from whom they claim damages. Nowhere in Mr Liang’s evidence or submissions did he assert or seek to prove any form of proprietary interest in the caveated property. In fact, he confirmed at the hearing that the sole purpose for lodging the caveat was to obtain security in relation to his damages claim. This was a misuse of the caveat procedure.

• [14] The application was a “hopeless case” from the outset, as it ignored the basic principle that a caveat secures a proprietary interest in the caveated property.

• [15] Having said that, the solicitors’ costs claimed are high for a caveat proceeding. I accept that Mr Han was required to respond, with evidence and submissions, to Mr Liang’s wide-ranging allegations across three affidavits, including serious allegations of fraud and forgery which required a response. Even taking that into account, the costs claimed are at the high end of what is reasonable for an essentially simple caveat proceeding. I consider that it is appropriate to award Mr Han indemnity costs at 80% of that claimed.

• [16] Accordingly, I award Mr Han costs in the amount of $67,896.80, plus disbursements of $3,473.54.

Costs against Jianyue (Paul) Young

• [17] Mr Han asks that an order is made that Mr Young is jointly and severally liable for the costs award to be made against Mr Liang.

• [18] Mr Young appeared at the hearing and calls of the matter, ostensibly in the capacity of translator to Mr Liang. However, Mr Han has filed evidence with his costs memorandum which he submits shows that Mr Young was actively involved in registering the caveat over Mr Han’s property. This evidence takes the form of an email chain between Mr Young and LINZ between 9 January 2023 and 20 January 2023. The telephone numbers provided in the email chain are Mr Young’s personal mobile number and landline. In the emails, Mr Young makes false allegations about Mr Han about bribing a LINZ officer.

• [19] Mr Han has also provided a copy of his email correspondence with the New Zealand Law Society. Mr Han complains that Mr Young is acting as a lawyer, and providing legal services to Mr Liang in relation to this proceeding. The Law Society confirms that they are investigating.

• [20] The principles to apply on an application for costs against a non-party were summarised by the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) as follows:³

[25] A number of the decided cases have sought to catalogue the main principles governing the proper exercise of this discretion and Their Lordships, rather than undertake an exhaustive further survey of the many relevant cases, would seek to summarise the position as follows:

(1) Although costs orders against non-parties are to be regarded as “exceptional”, exceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such “exceptional” case is whether in all the circumstances it is just to make the order. It must be recognised that this is inevitably to some extent a fact-specific jurisdiction and that there will often be a number of different considerations in play, some militating in favour of an order, some against.

(2) Generally speaking the discretion will not be exercised against “pure funders”, described in para [40] of Hamilton v Al Fayed as “those with

³ Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39, [2005] 1 NZLR 145.

no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course”...

(3) Where, however, the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party's costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is “the real party” to the litigation, a concept repeatedly invoked throughout the jurisprudence – see, for example, the judgments of the High Court of Australia in Knight and Millett LJ’s judgment in Metalloy Supplies Ltd (in liq) v MA (UK) Ltd [1996] EWCA Civ 671; [1997] 1 WLR 1613. Consistently with this approach, Phillips LJ described the non-party underwriters in TGA Chapman Ltd v Christopher [1997] EWCA Civ 2052; [1998] 1 WLR 12 as “the defendants in all but name”. Nor, indeed, is it necessary that the non-party be “the only real party” to the litigation in the sense explained in Knight, provided that he is “a real party in . . . very important and critical respects” – see Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation [2001] HCA 32; (2001) 179 ALR 406, referred to in Kebaro at pp 32 – 33, 35 and 37. Some reflection of this concept of “the real party” is to be found in CPR 25.13(1)(f) which allows a security for costs order to be made where “the claimant is acting as a nominal claimant”.

• [21] In Mana Property Trustee Limited v James Developments Limited the Supreme Court confirmed the same approach to “exceptional”:⁴

A non-party like a director or liquidator is not at risk of a costs award in other than exceptional circumstances, that is, circumstances outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense.

• [22] In Official Assignee v Jamieson, Venning J said that the principal issue is whether the non-party should be treated as the real party to the proceeding, and therefore potentially liable for costs as a non-party.⁵ In that case, Venning J considered whether the non-party substantially controlled the proceedings to be an important consideration. His Honour ordered the non-party to pay costs because “but for” the non-party’s funding of the litigation it would not have been pursued; and the non-party had a direct personal financial interest in the proceedings.

• [23] Here, while there is evidence that Mr Young was directly involved in filing the caveat and the application to sustain the caveat (his email address and phone numbers

4. Mana Property Trustee Limited v James Developments Limited [2010] NZSC 124, [2011] 2 NZLR 25 at [10].

⁵ Official Assignee v Jamieson [2014] NZHC 875.

appear on Mr Liang’s documents filed with the Court), these facts fall short of establishing that he was the real party in the proceeding. It is not clear that he had a personal interest in the outcome; or that “but for” his involvement the application would not have been made. Accordingly, I decline to make a non-party costs order against Mr Young.

• [24] Having said that, considering the information about his involvement with the caveat, it is not appropriate that Mr Young has any involvement in any related proceeding as Mr Liang’s translator or otherwise. Further documents from Mr Liang bearing Mr Young’s email address or phone numbers will not be accepted for filing. Mr Liang is to file with the Court an alternative address for service.

Associate Judge Gardiner