IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2024-404-496
[2024] NZHC 3761	

UNDER	the Land Transfer Act 2017, section 143	

BETWEEN	
SEOK YOUNG KANG
Applicant	
AND	DONGGUN KIM
and
SUJEONG LEE
Respondents	

Hearing:	On the papers	
Appearances:	Lawrence Ponniah for the Applicant
Paul Murray/Philippa Daniels for the Respondents	
Judgment:	11 December 2024	

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on   11 December 2024	at   3:00pm
pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:
Philip Law Office (Philip Lee), Hillcrest, North Shore, Auckland, for the Applicant C L Law Limited (Somee Chung), Takapuna, Auckland, for the Respondents

Counsel:
Lawrence Ponniah, Barrister, Eastridge, Auckland, for the Applicant
Paul Murray/Philippa Daniels, Akarana Chambers, Auckland, for the Respondents

KANG v KIM [2024] NZHC 3761 [11 December 2024]

[1]	By judgment issued on 11 October 2024, the Court granted the applicant’s orginating application for an order that the caveat lodged by the applicant over the property at 182 Lake Road, Northcote, Auckland (the Property), not lapse and awarded costs to the applicant (the Judgment).1

[2]	The judgment directed the parties to confer on the quantum of costs, failing which memoranda as to costs were to be filed. The parties were unable to agree on the quantum of costs, and counsel for the applicant filed a memorandum as to costs dated 4 November 2024 and counsel for the respondents filed a memorandum in reply dated 11 November 2024.

Applicant’s position

[3]	Mr Ponniah, for the applicant, is seeking indemnity or increased costs from the respondents. He submits that the applicant on several occasions prior to the caveat hearing, sought to find an amicable resolution to the matter. Paragraph [3] of his memorandum details the efforts he says the applicant made to avoid the cost of the caveat hearing.

[4]	Mr Ponniah submits that the respondents had no chance of being successful in its opposition to the caveat application for the following reasons:

(a)	on the face of the affidavit evidence there were clear disputed questions of fact, and disputes involving credibility of witnesses;

(b)	on the face of the affidavits, there was clear evidence of a reasonably arguable case for an interest in the Property in the form of contributions (direct or indirect to the Property and its acquisition), the verbal agreement on or about 18 December 2022, and part-performance of that verbal agreement;

1	Kang v Kim [2024] NZHC 2950.

(c)	the respondents’ opposition merely created disputed questions of fact and issues involving credibility of witnesses.

[5]	Mr Ponniah submits that the respondents continued their opposition to the application despite the fact that:

(a)	the applicant’s counsel’s submissions of 8 August 2024 set out clearly how on the evidence each of the three limbs of the doctrine of specific performance was met and how the requirements for the existence of an institutional constructive trust were met;

(b)	it was obvious on the balance of probabilities that the evidence was consistent with an oral agreement or at least pointed to the existence of such an alleged oral agreement;

(c)	it was obvious that the facts, on a balance of probability, supported a reasonable argument for the existence of an institutional constructive trust;

(d)	the respondents would have and/or should have known that the various arguments in opposition merely raised disputed questions of fact and issues involving credibility of witnesses which could not be determined by the summary nature of the application for the caveat not to lapse;

(e)	the respondents would or should have been aware that a caveat application was not the appropriate forum to resolve disputed issues of fact and credibility of witnesses based on the known applicable legal principles.

[6]	Mr Ponniah submits, in summary, that the judgment put beyond doubt the lack of merit in the respondents’ opposition to the application and disputed questions of fact and credibility of witnesses should have been obvious from the outset, and accordingly the opposition had no chance of success.

[7]	As to indemnity costs, Mr Ponniah submits the applicant should be entitled to indemnity costs on the grounds set out in r 14.6(4)(a) as the respondents unnecessarily defended or opposed the caveat application and for the reasons set out at paragraph [5] above.

[8]	In the alternative, the applicant seeks increased costs on the grounds set out in r 14.6(b)(ii) to (iv) on the basis that the respondents pursued an argument that lacked merit, and failed without reasonable justification to admit the legal position and/or failed to accept a reasonable offer of settlement. Mr Ponniah submits that this justifies an award of increased costs by way of an uplift of 50 per cent on the scale 2B costs for all steps. Mr Ponniah points to the decision of the High Court in Summer Construction Ltd v Bakker2 and the decisions of the Court of Appeal in NR v MR3 and Broadspectrum (New Zealand) Ltd v Nathan4 as authority for the proposition that increased costs should apply where the proceeding lacked merit and was inherently unlikely to succeed.

Respondents’ position

[9]	Mr Murray for the respondents submits that indemnity costs or increased costs are not justified and costs should be awarded on a 2B basis subject to certain reductions. Mr Murray refers to the judgment of the Court of Appeal in Bradbury v Westpac Banking Corp5 as to when indemnity costs may be ordered, and submits that the conduct of the respondents is not sufficiently egregious as to justify indemnity costs.

[10]	As to the authorities relied on by the applicants as justifying increased or indemnity costs, Mr Murray submits they are all distinguishable from the present case:

(a)	In relation to Summer Construction Ltd v Bakker,6 he submits the facts of that case were very different as it involved an unopposed application

2	Summer Construction Ltd v Bakker [2006] NZHC 1410.
3	NR v MR [2014] NZCA 623.
4	Broadspectrum (New Zealand) Ltd v Nathan [2017] NZCA 434 at [57].
5	Bradbury v Westpac Banking Corp [2009] 3 NZLR 400.
6	Above, n 2.

for increased (but not indemnity) costs by the applicant following an application to set aside a statutory demand. He submits the respondents was on notice that the applicant had a substantial counterclaim which would have extinguished the debt claimed. A Calderbank offer had been made by the applicant and not acknowledged by the respondents and the respondents made no submissions in response to the application for costs;

(b)	in relation to NR v MR,7 the appellant made wholly unjustified applications and appeals. The Court of Appeal held that this conduct had amounted to harassment of the respondents and the various lawyers involved. He submits the circumstances were extreme and distinguishable from the present case;

(c)	in relation to Broadspectrum (New Zealand) Ltd v Nathan,8 the Court of Appeal concluded of its own motion that the application was an abuse of process. He submits the respondents’ application was not an abuse of process.

[11]	As to the applicant’s submission that he made several attempts to settle the matter prior to the caveat hearing, Mr Murray submits that costs based on a rejection of a settlement offer are only engaged if the rejection is found to be unreasonable. He submits that the pre-hearing communications in this case do not provide a basis for a finding of an unreasonable rejection because:

(a)	the offer made by the applicant by email dated 15 April 2024 was not an offer to resolve the caveat application but sought to resolve the entire dispute, including the tenancy dispute in the District Court;

(b)	an offer may be relevant to costs following trial but is not relevant to costs following a finding of an arguable case in a caveat proceeding. For an offer to be relevant for costs purposes, it must be specific to

7	Above, n 3.
8	Above, n 4.

resolving the proceeding, or a step in the proceedings, in which the costs are incurred;

(c)	although both parties attended a settlement meeting, neither party made a settlement offer following the meeting and no resolution was reached. No offer was made to resolve only the caveat application.

[12]	Mr Murray submits that the matters raised in opposition by the respondents were sufficiently arguable that indemnity or increased costs are not appropriate. He submits the respondents’ case was that disputed matters of fact that arose from the affidavits were irrelevant to determining the caveat application. He submits that the respondents’ position was that the applicant’s evidence fell short of establishing an arguable case and so a determination dismissing the application could be made on the affidavits. He submits that there was no finding in the Judgment that the claim was hopeless or that the respondents’ position was meritless.

Quantum of costs

[13]	Mr Murray submits that the quantum of indemnity costs claimed by the applicant of $49,156.05 is excessive. He calculates that the applicant’s costs on a 2B basis would be $11,352.50 and given the scale costs they are intended to represent approximately two-thirds of actual costs, then reasonable and actual costs should be approximately $17,000.

[14]	In addition, Mr Murray takes issue with the calculation of the 2B costs claimed by the applicant, his objections being set out at [25] of his memorandum.

Reduction in costs

[15]	Mr Murray also seeks a reduction in costs of $3,000. This is on the basis that the respondents made an offer to resolve costs on a 2B basis, to which the applicant did not respond, and accordingly the applicant’s have pursued an argument for indemnity or increased costs that lacks merit, and failed to accept a reasonable offer, thereby justifying the reduction of the $3,000 sought.

Result

[16]	I am of the view that the respondents’ opposition to the applicant’s application was not sufficiently hopeless or meritless to justify increased or indemnity costs being awarded to the applicant. The respondents’ proposition was that the disputed issues of fact and credibility of witnesses did not need to be determined in respect of the application to sustain the caveat as on the applicant’s evidence the applicant had not made out an arguable case to sustain the caveat. In my view this position was not unarguable.

[17]	I do not accept the respondents’ application for reduction of costs as the applicant’s application for increased or indemnity costs was not completely unarguable and accordingly the applicant’s rejection of the respondents’ offer to settle costs on a 2B basis does not justify a reduction of costs.

[18]	As to the quantum of costs, in my view the calculation attached to Mr Murray’s memorandum with costs totalling $11,352.50 is correct. Item 41 which is claimed three times, is not allowed, and in my view a claim for preparing the memorandum as to costs prepared by the applicant is not allowed as the argument relating to costs does not justify “costs on costs”.

Orders

[19]	I order that the respondents are to pay the applicant costs assessed on a 2B basis of $11,352.50 together with disbursements of $1,437.80.

…………………………….. Associate Judge Taylor