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Wanbao Solution Limited v Vincent Capital Limited [2023] NZHC 454 (9 March 2023)

Last Updated: 29 March 2023

JUDGMENT OF ASSOCIATE JUDGE TAYLOR

[Costs]

This judgment was delivered by me on 9 March 2023 at 4pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Chapman Tripp, Auckland for defendant Copy to:

The plaintiffs and first counterclaim defendant

WANBAO SOLUTION LTD v VINCENT CAPITAL LTD [2023] NZHC 454 [9 March 2023]

[1] This matter was called before the Court in the Chambers List at 2.15 pm on 25 November 2022. Counsel for the plaintiffs filed an application dated 16 November 2022 for an order that Kathleen Morrison of Meredith Connell cease to be the solicitor on record for the plaintiffs and the counterclaim defendants. Mr Pan, the first counterclaim defendant, appeared representing himself and the plaintiffs. Ms Littlewood appeared on behalf of the defendant.

[2] At the Chambers List hearing, Mr Pan indicated to the Court that he wished to discontinue the proceeding and Ms Littlewood, on behalf of the defendant, indicated the defendant would seek costs.

[3] Following the Chambers List hearing, the Court issued a minute making the following orders:

(a) Kathleen Morrison of Meredith Connell shall cease to be solicitor on the record for the plaintiffs and the counterclaim defendants in accordance with r 5.41 of the High Court Rules 2016.

(b) The proceedings are discontinued by the plaintiffs.

(c) No order is made as to costs. If the defendant wishes to seek costs, counsel are to file a memorandum as to costs within 10 working days of the date of the minute.

[4] Counsel for the defendant has filed a memorandum as to costs dated 9 December 2022. Neither the plaintiffs, nor Mr Pan, have filed any response to the defendant’s memorandum.

[5] The defendant seeks a costs award of $32,898 including disbursements of

$1,350 against the plaintiffs and Mr Pan jointly.

Background

[6] The plaintiffs are property development companies run by Mr Pan, a property developer. The defendant is a property finance company that provided finance to the plaintiff companies in 2018 and 2019. The terms of the loans from the defendant to

the plaintiffs were documented in loan agreements dated 28 March 2018 and 4 February 2019 and the counterclaim defendants, including Mr Pan, are the guarantors of those loans.

[7] The plaintiffs filed a statement of claim on 23 November 2021 alleging breaches of the Credit Contracts and Consumer Finance Act 2003, duress and unconscionable bargain by the defendant. The defendant filed a statement of defence and counterclaim dated 1 February 2023 in which the defendant denied the alleged conduct and pleaded that the plaintiffs and counterclaim defendants had agreed not to issue any proceedings in relation to the loan agreements. The only relief sought by the counterclaim was that the plaintiffs and the counterclaim defendants pay the defendant’s solicitor and client costs in relation to the proceeding. The counterclaim was based on indemnity costs clauses in cl 14.1 of each of the loan agreements.

[8] The plaintiffs and counterclaim defendants filed a reply and defence to the counterclaim dated 16 February 2022, and the defendant filed and served an affidavit of documents on 27 April 2022. The plaintiffs were due to file and serve an affidavit of documents on 27 April 2022 but did not do so.

[9] On 26 August 2022, Lang J made the following orders:

(a) requiring the plaintiffs to file and serve their affidavit of documents no later than 25 November 2022; and

(b) that the proceeding would be struck out on 25 November 2022 if the plaintiffs did not file and serve their affidavit of documents by that date.

[10] Orders as set out at [3] above were made at the Chambers List hearing on 25 November 2022.

The defendant’s entitlement to costs

[11] The defendant submits that pursuant to r 15.23 of the High Court Rules 2016 it is entitled to costs as the plaintiffs have discontinued the proceeding and the proceeding has been categorised as category 2 pursuant to a minute of Associate Judge Andrew dated 18 March 2022.

[12] The defendant seeks scale costs as set out at [18] of its memorandum. The defendant submits, relying on r 14.2(b), band C is appropriate for the defendant’s list of documents on discovery because the complexity and significance of the proceeding was such that the defendant was required to review a significant number of documents to complete the list. The defendant submits that band C is justified in relation to the documents because:

(a) The defendant reviewed 17,556 documents, spent approximately 145 hours preparing the list of documents for discovery and paid approximately $55,000 in legal fees.

(b) It is in the interests of justice to order that the plaintiffs pay costs on a 2C basis because of the plaintiffs’ conduct in relation to discovery. The plaintiffs failed to prosecute their claim, and did not go to the expense of preparing a list of documents.

(c) Had the plaintiffs told the defendant earlier that they had no ability or intention of pursuing the claim (rather than stating that to the Court on 25 November 2022), the whole of the defendant’s actual costs of discovery would have been avoided and therefore the plaintiffs’ conduct has put the defendant to unnecessary cost.

Is it appropriate to order Mr Pan to pay costs also?

[13] The defendant submits that Mr Pan should be jointly liable for the costs on the following basis:

(a) under r 14.1 of the High Court Rules and the Court’s inherent jurisdiction, the High Court has power to make an order for costs against non-parties to a proceeding.¹

1. Palmerston North City Council v Hardiway Enterprises Ltd (struck off) [2018] NZHC 1731 at [17].

   (b) the interests of justice ordinarily requires a non-party to pay costs when the non-party substantially controls, or is to benefit from, the proceedings.² The defendant submits Mr Pan substantially controls, or is to benefit from, the proceeding and is effectively “the real party” behind the plaintiffs’ claim because:

(i) Mr Pan is the sole director and shareholder of the plaintiff companies and as such he has substantially controlled, and if successful was to benefit from, the proceeding;

(ii) at [10] of the statement of claim, the plaintiffs plead that the plaintiff companies are “controlled by Mr Pan”;

(iii) the plaintiffs’ claim is largely based on actions and omissions that took place between Mr Pan and representatives of the defendant – there are no other representatives of the plaintiff companies involved in the actions or omissions on which the claim is based;

(iv) Mr Pan is the guarantor of the loan agreements that the claim is in relation to;

(v) Mr Pan has committed contractually to meet the defendant’s costs as he was a guarantor of loans and each of the two relevant loan agreements contained a costs clause.

[14] Having considered the submissions by the defendant, I am of the view that costs should be ordered as sought against the plaintiffs and Mr Pan jointly.

Orders

[15] I make the following orders:

(a) the plaintiffs and Mr Pan are jointly to pay the defendant’s costs of

$31,548 and disbursements of $1,350, totalling $32,898;

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

   (b) the defendant shall take no further steps in relation to its counterclaim for indemnity costs against the plaintiffs and Mr Pan.

Associate Judge Taylor