Americhip, Inc v Dean
[2015] NZHC 1871
•10 August 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-4247 [2015] NZHC 1871
BETWEEN AMERICHIP, INC
Plaintiff
AND
JASON CHARLES DEAN
Defendant
Hearing: On the papers Counsel:
L Theron for Plaintiff
D P H Jones QC for DefendantJudgment:
10 August 2015
JUDGMENT OF KATZ J [Costs]
This judgment was delivered by me on 10 August 2015 at 3:30pm
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors: Meredith Connell, Wellington
Winston Wang & Associates, Auckland
Counsel: D P H Jones QC, Auckland
AMERICHIP, INC v DEAN [2015] NZHC 1871 [10 August 2015]
Introduction
[1] The plaintiff, Americhip, Inc (“Americhip”) alleges in these proceedings that
the defendant, Jason Dean, defrauded it of approximately US$10 million between
2003 and 2012. Americhip further alleges that Mr Dean, who is a New Zealander, has used approximately NZ$2 million of those funds to buy a house in Auckland.
[2] Mr Dean applied to stay Americhip’s proceedings against him on the basis that New Zealand is not the appropriate forum for the claims to be heard and determined. Rather, he argued, Americhip should issue proceedings against him in China. I dismissed that application on 14 April 2015.1
[3] Americhip now seeks costs in respect of the stay application, as well as costs in respect of an earlier interlocutory hearing before Ellis J. In respect of the stay application, Mr Dean accepts that scale costs, the filing fee and photocopying costs (together totalling $5,981.50) are properly payable in respect of the stay application. He contests, however, the expert witness fess claimed of $19,830.83. In respect of the earlier interlocutory hearing before Ellis J, in which Mr Dean sought to set aside the proceedings for lack of jurisdiction, he challenges the entirety of the costs claim ($6,080) and says, in essence, that costs should lie where they fall.
Are the expert costs incurred in relation to the stay application properly recoverable?
[4] Americhip seeks to recover a disbursement of $19,830.82 in respect of the costs incurred in obtaining an affidavit on Chinese law by Hu Xiaohong, a lawyer from the Jun He law office in Shanghai.
[5] Mr Dean submitted that the Court should either not allow the entire disbursement, as it is unreasonable, or that the disbursement should be reduced or disallowed as disproportionate in the circumstances of the proceedings. The information provided in the affidavit was said to be “not complex” and did not merit
the level of time spent on it by a senior practitioner.
1 Americhip Inc v Dean [2015] NZHC 700.
[6] Rule 14.12 of the High Court Rules sets out the requirements relating to recovery of disbursements. It provides:
(1) In this rule,—
disbursement, in relation to a proceeding,—
(a) means an expense paid or incurred for the purposes of the proceeding that would ordinarily be charged for separately from legal professional services in a solicitor’s bill of costs; and
(b) includes—
(i) fees of court for the proceeding:
(ii) expenses of serving documents for the purposes of the proceeding:
(iii) expenses of photocopying documents required by these rules or by a direction of the court:
(iv) expenses of conducting a conference by telephone or video link; but
(c) does not include counsel’s fee.
relevant issue, in relation to a disbursement, means the issue in respect of which the disbursement was paid or incurred.
(2) A disbursement must, if claimed and verified, be included in the costs awarded for a proceeding to the extent that it is—
(a) of a class that is either—
(i) approved by the court for the purposes of the proceeding;
or
(ii) specified in paragraph (b) of subclause (1); and
(b) specific to the conduct of the proceeding; and
(c) reasonably necessary for the conduct of the proceeding; and
(d) reasonable in amount.
(3) Despite subclause (2), a disbursement may be disallowed or reduced if it is disproportionate in the circumstances of the proceeding.
[7] The expert costs sought by Americhip fall within the definition of disbursement in r 14.12(1)(a). Because the disbursement does not fall within any of the categories within r 14.12(1)(b), it must be approved by the court under r 14.12(2)(a)(i). The court has the discretion to grant such approval if the
disbursement meets the criteria set out in r 14.12(2)(b) – (d), that is, that the disbursement was specific to the conduct of the proceeding, was reasonably necessary for the conduct of the proceeding, and was reasonable in amount.
[8] There appears to be no contest that Americhip’s expert costs were specific to the conduct of the proceeding. I will accordingly focus on whether the costs incurred were reasonably necessary for the proceeding and were reasonable in amount.
[9] The application was for a stay of proceedings on the basis that another available forum with competent jurisdiction (namely China) was the appropriate forum for the determination of the issues raised by the proceedings. That required information about the law in China, including whether Chinese courts would have jurisdiction over such a claim, the possible governing law of the contract, and any procedural advantages or disadvantages to the Chinese courts over the New Zealand
courts.2 Those issues all required expert evidence of Chinese law. I note that
Mr Dean also provided an affidavit from an expert witness on relevant aspects of
Chinese law.
[10] Mr Hu’s evidence was necessary to three of the key issues that I had to determine, namely whether another forum (China) was more appropriate, the relative cost and convenience of proceeding in each jurisdiction, and whether there were any procedural advantages in either jurisdiction. Mr Hu’s evidence was of assistance to me on each of these issues. I am therefore satisfied that an expert witness as to Chinese law was reasonably necessary for the proceeding.
[11] In support of his submission that the quantum of costs incurred was unreasonable, Mr Dean submitted, by analogy, that the comparable cost for a New Zealand lawyer to prepare a brief or affidavit on a 2B basis would be just
$4,975, with reference to item 30 of Schedule 3 to the High Court Rules. The comparison is not at, however. That item sets out the scale costs that may be claimed by a party for costs incurred by their solicitor in the preparation of evidence
for trial generally (not in respect of a specific affidavit or brief to be sworn by that
2 Americhip v Dean, above n 1, at [17].
solicitor). Further, the High Court Rules provide different regimes for the recovery of legal costs (on the one hand) and disbursements (on the other). The rules provide for a “contribution” to legal costs, calculated on the basis set out in Schedule 2. That contribution is not intended to equate to the actual legal costs incurred. Disbursements, on the other hand, are fully recoverable, provided they satisfy the
criteria in r 14.12.3
[12] I must therefore consider whether the amount of time claimed for the preparation of Mr Hu’s affidavit, and the hourly rates charged, are reasonable. Mr Hu’s hourly rate, calculated using the exchange rate at 31 December 2014 (the last day for payment of the bill) was approx $713 per hour. As is often the case with expert witnesses, two other members of his team provided some assistance, but their involvement does not appear to have been significant or inappropriate.
[13] Mr Hu is a partner in Jun He, one of the leading full service law firms in Shanghai. He has been a senior judge in China for over seven years. He was selected to provide expert evidence on the basis of his expertise in the field and, as such, is in a position to command a premium for his work. Given that background I accept that his hourly rate is within the acceptable range, albeit in my view it is towards the upper end of that range.
[14] Americhip submitted that the amount of time spent preparing the affidavit was also reasonable, particularly given that Mr Hu was not working in his first language and was required to explain Chinese processes (in a civil law context) in terms that would be of assistance to a New Zealand court (operating in a very different context and legal culture).
[15] Mr Hu’s affidavit is fairly detailed. It outlines the process that would be involved in filing and serving the claim in China, the appropriate Chinese court with jurisdiction, the pre-trial disclosure processes, the process for determining the claim (such as whether the parties would be represented by lawyers, whether an oral
hearing takes place, whether cross-examination takes place and the timeframe for a
3 Air New Zealand v Commerce Commission [2007] NZCA 27, [2007] 2 NZLR 494 at [47] – [48]; Andrew Beck and others McGechan on Procedure (online looseleaf edition, Westlaw) at [HR14.12.01(4)].
determination), rights of appeal and costs. These questions are all addressed with reference to the Civil Procedure Law of the People’s Republic of China. There is also some application of the law to the particular facts of this case (for example, one of the nine questions answered is about whether a court in China would hear a claim in the circumstances of the Americhip dispute). Having carefully reviewed the detailed narrative provided with Mr Hu’s invoice I am satisfied that the 36 hours claimed for preparation of the affidavit is reasonable.
[16] Mr Dean further submitted that the quantum of the disbursement should be reduced due to subsequent developments in the case. In particular, the utility of Mr Hu’s evidence is said to be undermined because Americhip has allegedly since resiled somewhat from its position that Mr Hu was an employee.
[17] In my view there is no merit in this submission. First, I must assess the necessity of Mr Hu’s affidavit, and its utility, in the context of the specific application that I was required to determine. Further, even if Americhip had conceded, in the context of the stay application, that Mr Dean may not have been an employee and may have been an agent, that would have not significantly undermined the utility of Mr Hu’s affidavit. Mr Dean’s expert, Xinping Lai, simply did not address a number of the key issues that needed to be addressed. Mr Hu’s affidavit was accordingly the only source of assistance on a number of the key issues I was required to determine.
[18] For the reasons outlined I am satisfied that the quantum of costs claimed in
respect of Mr Hu’s affidavit is reasonable.
Costs of hearing before Ellis J
[19] Americhip also claims costs of $6,080 (calculated on a 2B basis) for the costs of an earlier interlocutory hearing before Ellis J. The first issue I must consider is whether this aspect of the application would be more appropriately determined by Ellis J.
[20] The normal practice is for the judge who dealt with a particular interlocutory
(or substantive) matter to deal with any costs issues that arise. Rule 14.9 provides,
however, that costs “may be determined by a Judge or an Associate Judge other than the one who heard the matter to which the costs relate, if he or she is not available conveniently to make the determination”.
[21] I have conferred with Ellis J on the issue. Since delivering her judgment she has transferred to the Wellington Registry of the High Court. These proceedings are filed in the Auckland Registry and are accordingly managed by Auckland-based judges. The files are voluminous and are located in Auckland. They need to be readily available in Auckland due to the level of interlocutory activity on the file. Ellis J is accordingly not conveniently available to determine the costs issues relating to the application that she determined. I will accordingly resolve those issues.
[22] Ellis J delivered an interlocutory judgment on 12 March 2014, in favour of
Mr Dean.4 That judgment was overturned by the Court of Appeal on 8 August
2014.5 Americhip submitted that in such circumstances costs are now at large and at the discretion of the court under r 14.1. Where a party is successful on appeal, they are usually treated as entitled to recover costs of the hearing below as if they had won the lower court case.6 Americhip therefore seeks costs on a 2B basis, as Ellis J had awarded to Mr Dean.
[23] Mr Dean submitted that the Court of Appeal has effectively determined costs already. It quashed the High Court costs order and ordered Mr Dean to pay Band A costs for the appeal. It made no order in relation to Americhip’s costs in the High Court and did not remit the matter back to this court for determination. This is said to distinguish this case from other cases, in which the Court of Appeal has made such an order.7
[24] Mr Dean also submitted that the application for costs has been unduly delayed, given that the Court of Appeal judgment was delivered in early August 2014 and the request for costs was first made in late April 2015. Any award
of costs should be reduced to reflect the delay in seeking them.
4 Americhip Inc v Dean [2014] NZHC 450.
5 Americhip Inc v Dean [2014] NZCA 380; [2014] NZAR 1137.
6 LSG Sky Chefs New Zealand Ltd v Pacific Flight Catering Ltd [2015] NZHC 685.
7 Pacific Flight Catering Ltd v LSG Sky Chefs New Zealand Ltd [2013] NZCA 386, [2014]
2 NZLR 1 at [43].
[25] It is correct that in LSG Sky Chefs v Pacific Flight Catering,8 as in other cases,9 costs were reconsidered after the Court of Appeal had specifically remitted the matter back to the High Court for reconsideration of costs. I do not consider, however, that the lack of a specific order requiring the High Court to reconsider costs
should be seen as signalling an intention that no order for costs be given. Issues of costs are commonly reconsidered in the High Court following a successful appeal. The effect of the quashing of the High Court costs order is that no costs award has been made in relation to the High Court decision. Costs issues are therefore at large.
[26] In Wholesale Distributors v Songle, Moore J revisited his costs decision following being overturned by the Court of Appeal. The Court of Appeal had made no order for costs to be reconsidered, but Moore J considered that he had jurisdiction to reconsider his costs decision as it was appropriate under r 14.8(2). That rule states that the Court has the power to reverse, discharge or vary its own costs order on an interlocutory application if subsequently satisfied that the original
order should not have been made.10 Similarly, in Exportrade Corporation v Irie Blue
New Zealand Limited, Toogood J stated that he did not consider “that the failure of a Judge to reserve a question of costs in a judgment on an interlocutory application deprives the Court of jurisdiction to make an award of costs post-judgment”.11 This is consistent with the general principles relating to costs, in particular that costs are at the general discretion of the court under r 14.1.
[27] Both LSG Sky Chefs and Wholesale Distributors indicate that the general principle that a successful party is entitled to costs also applies where the party is “successful” in the lower court due to an appeal.12 Other cases also support this approach.13
[28] The practical consequence of Ellis J’s decision being overturned on appeal is
that Americhip was the successful party in this court. As such it is entitled to an
8 LSG Sky Chefs New Zealand Ltd v Pacific Flight Catering Ltd [2015] NZHC 685.
9 Murrell v Hamilton [2014] NZCA 377.
10 Wholesale Distributors v Songle [2015] NZHC 809.
11 Exportrade Corporation v Irie Blue New Zealand Limited [2013] NZHC 427.
12 Wholesale Distributors v Songle, above n 10; LSG Sky Chefs New Zealand Ltd v Pacific Flight
Catering Ltd, above n 8.
13 Grant v Lotus Gardens Ltd [2014] NZHC 829; Just One Life Ltd v Queenstown Lakes District Council HC Christchurch CP19/02, 21 December 2004; Mason v Lewis HC Auckland CIV 2003-404-936, 22 July 2011.
award of costs in its favour, on a 2B basis (being the same basis on which Mr Dean was originally awarded costs). In my view no prejudice was caused to Mr Dean by Americhip awaiting the outcome of the stay application and then seeking costs in relation to both the jurisdiction and stay applications together. The delay in seeking costs in respect of the jurisdiction application does not preclude a claim now being made, or justify a reduction in the quantum of the claim.
Result
[29] In respect of the stay hearing before me, Mr Dean is ordered to pay Americhip’s costs and disbursements in the sum of $25,812.33 (which includes the full costs of preparation of Mr Hu’s affidavit).14
[30] In respect of the hearing before Ellis J, Mr Dean is ordered to pay costs and disbursements on a 2B basis, in the sum of $6,080.
Katz J
14 This judgment was amended on 11 August 2010, pursuant to r 11.10 of the High Court Rules, to record the correct quantum of costs and disbursements in respect of the stay application (namely $25,812.33).
12
9
1