Bi v Westcoast Mining Ltd
[2024] NZHC 405
•1 March 2024
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2019-418-0003
[2024] NZHC 405
UNDER the Companies Act 1993 IN THE MATTER
of an application for relief under s 174 of the Act
BETWEEN
JIANTAO BI
Plaintiff
AND
WESTCOAST MINING LTD
First Defendant
AND
GOLDEN COAST HOLDING LTD
Second Defendant
AND
CHAO ZHANG
Third Defendant
AND
MINGHOU ZHANG
Fourth Defendant
Counsel: R A Hearn and P Kaur for Plaintiff
J V Ormsby and M J McKay for Defendants
Judgment:
1 March 2024
(Determined on the papers)
JUDGMENT OF OSBORNE J [COSTS AND DISBURSEMENTS]
JIANTAO BI v WESTCOAST MINING LTD [2024] NZHC 405 [1 March 2024]
Introduction
[1] In this proceeding the Court, following a seven-day hearing, dismissed the plaintiff’s claim and the first and second defendants’ counterclaims and reserved the costs and disbursements of the proceeding (Judgment).1 I directed that costs and disbursements would be determined on the papers based on memoranda, which have now been filed.
[2] Counsel agree the time taken at trial should realistically be allocated as six days for the plaintiff’s claim and one day for the first and second defendants’ counterclaim.
[3] For the plaintiff, Mr Hearn submits costs should not be determined at this stage because the plaintiff is expeditiously pursuing an appeal which, if successful, “could render any costs judgment redundant”. I do not accept that submission and will proceed to determine costs now. To defer the determination of costs pending an appeal is inconsistent with the principle of expeditious determination set out in r 14.2(1)(g) High Court Rules. The successful party is entitled to the prompt determination of costs while matters remain fresh for the trial Judge and counsel. The successful party is then able to recover such costs and disbursements as the Court awarded, in accordance with the general entitlement to make such recovery.2
[4]The proceeding is a Category 2 proceeding.
Defendants’ initial claim
[5] For the defendants, Mr Ormsby identified why, on the established principles, the defendants should have orders in their favour. He then submitted that most steps should appropriately be determined as band B but with some steps as band C. On that basis the defendants claimed $119,868 for costs (representing $130,733 offset by
$10,865 on account of the counterclaim).
[6]The defendants also seek on account of disbursements $111,380.20 of which
$110,940.20 represents expert witnesses’ fees and disbursements.
1 Bi v Westcoast Mining Ltd [2023] NZHC 2736 [Judgment].
2 Walker v Castlereagh Properties Ltd [2015] NZHC 907; [2015] NZAR 944 at [42]–[45].
[7] A table setting out the defendants’ costs and disbursements calculations is attached to this judgment as Schedule A (defendants’ initial schedule).
Plaintiff’s position
[8] For the plaintiff, Mr Hearn accepted the general legal principles invoked by Mr Ormsby. He largely accepted the items and calculations in relation to the defendants’ costs contained in the defendants’ schedule. He challenged some items claimed by the defendants and submitted the plaintiff’s entitlement in relation to the counterclaim was greater than suggested by Mr Ormsby. Mr Hearn challenged the disbursement claim by the defendants for two expert witnesses (one in its entirety and the other in part) and challenged a service fee.
[9] Mr Hearn provided a table, being a (colour) marked-up version of the defendants’ schedule, which is attached to this judgment as Schedule B (plaintiff’s schedule). On the plaintiff’s calculations, the defendants’ costs are reduced to
$67,278.50 (representing $88,071.50 offset by $20,793 on account of the counterclaim). The total for disbursements is calculated as $54,440.67 (representing
$62,085 (as recalculated) for the defendants offset by $7,644.33 being disbursements incurred by the plaintiff on account of the counterclaim).
Defendants’ finalised claim
[10] Upon the filing of the plaintiff’s position, Mr Ormsby revised the defendants’ claim to take account of some points made for the plaintiff. Mr Ormsby filed an amended schedule — it reduced the defendants’ claim for costs (after allowing for costs on the counterclaim) to $112,937 (the disbursements remained the same). The plaintiff’s finalised costs claim is $112,937. A table setting out these real calculations is attached to this judgment as Schedule C (defendants’ finalised schedule).
Verification of disbursements
[11] Pursuant to a Minute issued by the Court following the filing of counsels’ initial submissions and documents, the defendants filed further evidence and a memorandum to verify the disbursements claimed as required by r 14.12(2) High Court Rules.
[12] Mr Hearn, in response, to the defendants’ supplementary material, took no issue with the defendants’ experts’ various hourly rates which he accepted were reasonable, but to the extent the disbursements were challenged, relied on the submissions previously filed. He submitted however that two attendances of Chris Whiteside, a senior manager in Mr Hollis’s office, (representing $1,435) were not necessarily incurred.
The proceeding
[13] The nature of the proceeding, the plaintiff’s claim and the first and second defendants’ counterclaims were explained in early paragraphs of the Judgment:
[2] In 2016, two men discussed a business venture to undertake gold mining on the West Coast. Two companies (“the Companies”) — the first and second defendants — were then incorporated. The shares were owned 20 per cent by the plaintiff and 80 per cent by the third defendant.
[3] The arrangements agreed upon by the parties were not formally documented. The people involved are Chinese and the Court has heard and considered evidence regarding Chinese business culture.
[4] The business venture did not go well. By late-2018, the defendants took steps to close the operations, remove the plaintiff as a director of the Companies and issue further shares.
[5] The plaintiff commenced this proceeding for relief under s 174 Companies Act 1993 (the Act). He alleges the third and fourth defendants have conducted the Companies’ affairs in a manner that is oppressive and unfairly prejudicial to him. He seeks orders that the third or fourth defendant purchase his shares at a price determined by the Court and that they pay compensation for alleged failures.
[6] The Companies’ counterclaim is for damages for alleged breaches of fiduciary duty and negligence on the part of the plaintiff.
[7] The third and fourth defendants deny they have engaged in oppressive or unfairly prejudicial conduct. They submit the plaintiff has acted in those ways, and that his breaches of duty disentitle him to any relief under the Act.
[8] The third defendant wishes to acquire the plaintiff’s shares at a fair value, calculated at the time the plaintiff ceased to be involved in the Companies.
[9] It is common ground the individuals involved can no longer co- operate in relation to the affairs of the Companies and a solution would lie in the plaintiff’s shareholding being transferred to the third defendant.
[10] Beyond that measure of agreement, there remain significant issues as to the precise nature of arrangements entered into between the parties, the
nature of contributions that each agreed to make, how they then conducted themselves, how the price of the plaintiff’s shares should be set and, if so, to what extent, if any, the conduct of any of the parties justifies relief under the Act — at common law or in equity.
[11] The third and fourth defendants deny they have any liability to the plaintiff. The third defendant therefore does not consent to the Court making an order of transfer.
[14] The proceeding had a drawn out pre-trial history. The plaintiff filed a statement of claim in February 2019 with an (ultimately unsuccessful) application for injunctive relief. By November 2020 he had filed three amended statements of claim, with the last including a claim for $5 million compensation (and, alternatively, something greater). The third and fourth defendants filed defences to each iteration of the statement of claim. In April 2021 the first and second defendants filed a statement of counterclaim for quantified damages exceeding $800,000 and additional, unquantified, damages.
[15] During the filing of pleadings, the parties each pursued interlocutory relief which, following determination, was the subject of a judgment dealing with the costs and disbursements of those applications.3
[16] A case management conference in November 2021, convened to address the plaintiff’s failure to comply with timetable directions in relation to his evidence, was also the subject of a separate costs judgment against the plaintiff.
[17] The costs and disbursements to be determined by this judgment are all the interlocutory steps not previously the subject of costs awards and the attendances at trial.
[18] By the standards of litigation between parties who are essentially individuals, this was relatively complex litigation. That is reflected in the range of expert witnesses briefed to give evidence:
(a)Dr John Youngson and Richard Cotton on mining valuation;
3 Bi v Westcoast Mining Ltd [2020] NZHC 2940.
(b)Simon Carey, Malcolm Hollis and Craig Melhuish on business valuation; and
(c)Leo Liao and Ruiping Ye on Chinese culture.
[19] The extent of the evidence is reflected in the fact the plaintiff served briefs of evidence with attached documents extending to 3,371 pages and provided an additional 1,340 pages of material for the bundles. The defendants’ evidence and supporting documents comprised 1,491 pages.
[20] It transpired in the Judgment, with the outcome of the claims and counterclaims turning substantially upon the Court’s findings of fact in relation to the dealings between the parties, that little of the expert evidence adduced was material to the outcome. During the trial counsel ultimately decided not to call one set of experts — those relating to Chinese culture.
Analysis — costs
[21] To determine the appropriate award of costs, I have taken the defendants’ finalised table (Schedule C) and produced a marked-up version (attached as Schedule
D) to record my conclusions. Schedule D includes notations only in relation to items challenged by the plaintiff. The notation “approved” indicates the defendants’ claim was appropriate. The notation “amended” indicates the plaintiff’s claim was excessive. For each item annotated I have allocated an alphabetical letter which is used in the table below to explain the determination.
TABLE A
Note
Defendants’ costs
A
Opposition to interim injunction application
The defendants claim band C, on the basis a comparatively large amount of time was reasonable.4
The plaintiff, having been excluded from the operations of the first and second defendants, sought injunctive orders that would have restrained, amongst other things, the resumption of mining activities by the first and second defendants. The third and fourth defendants necessarily each filed detailed affidavits in opposition (the fourth defendant from Hong Kong). The plaintiff in reply filed a 77-paragraph affidavit with 20 exhibits. A reasonable time for the steps taken by the defendants clearly falls within band C.
Item B
Written submissions (injunction)
The defendants claim band C. The extent of matters arising for consideration at the interim injunction hearing is reflected in the fact that the hearing was allocated a half day and the Court’s judgment delivered the following day.5 Once the evidence was assembled, the requirements of preparing written submissions reasonably required only a normal amount of time, hence band B.
Item C
List of documents on discovery
The defendants filed three affidavits in relation to discovery, being one by each of the third and fourth defendants in relation to their personal documents and one by the fourth defendant in relation to additional documents of the first and second defendants. By the defendants’ initial schedule, they sought a single item for the list of documents on a band B basis. Mr Hearn has submitted that band A is appropriate because the defendants’ discovery totalled fewer than 500 documents. That submission overlooks the fact that three sets of defendants had to make discovery of their respective documents and have claimed a single item. Band B is appropriate.
Item D
Inspection of documents
The defendants sought band C. The plaintiff’s discovery totalled fewer than 1500 documents. Band B is appropriate.
4 High Court Rules, r 14.5(2)(c).
5 Bi v Westcoast Mining Ltd [2019] NZHC 860.
Item E
Preparation of affidavits
The plaintiff sought 14 days for preparation of affidavits, citing band C, on the basis preparation took materially longer than for a standard s 174 Companies Act 1993 case, primarily due to the breadth of the factual and expert issues arising from the plaintiff’s pleadings and evidence. Implicitly this is based on Item 30, Schedule 3 High Court Rules. Mr Hearn notes an error in claiming seven days — the defendants’ success related to six days of the hearing. The plaintiff also submits band B is appropriate. I accept the plaintiff’s position on both aspects — in terms of the time involved, the volume of affidavit material was proportionate to a six-day hearing. Band B will be allowed on the basis of a six-day hearing.
Item F
Preparation for hearing
The defendant’s claim (under Item 32) was for seven days. As Mr Hearn submitted, the correct calculation is 6.75 days, which is what will be allowed.
Plaintiff’s costs
Item G
Appearance of second counsel
The plaintiff claims for second counsel (one half-day). Mr Ormsby submits that the counterclaim did not require second counsel. I find to the contrary that it did reasonably call for second counsel — the counterclaim raised a raft of serious allegations against the plaintiff including of dishonesty, breach of fiduciary duty and negligence across numerous aspects of the mining operations. I accordingly have certified for second counsel.
Item H
The plaintiff’s schedule also sought items for discovery of documents and inspection of documents. As Mr Ormsby has submitted, discovery was in fact completed before the counterclaims were filed. No additional discovery or inspection was necessary for the counterclaim. No allowance is made for these items.
Analysis — disbursements
[22] The verifying evidence filed by the defendants for the most part satisfies me the defendants’ claimed disbursements were reasonably necessary for the conduct of the proceeding and reasonable in amount. As much as was appropriately recognised by Mr Hearn in challenging three aspects of the disbursements claimed by the defendants.
[23] I have already described this as having been relatively complex litigation. The mining valuation evidence required ranged over several mining interests in varying stages of development and was complex. The accounting evidence was similarly complicated having regard to the nature of the underlying “assets” and the difficulties of business valuation associated with the parties’ enterprise. There was the further suggested complexity arising from the parties asserting that issues of Chinese business culture arose, which itself became the subject of briefed expert evidence.
[24] Against that background, I focus on the three matters of disbursement challenged by the plaintiff:
(a)Service fees: the service fees claimed by the defendants totalling
$1,116 related to witness summonses served on two expert witnesses (one of them twice). Mr Hearn’s objection to these disbursements was that the two witnesses in question (Mr Cotton and Mr McKinnell) were both expert witnesses being remunerated for their time. I am not satisfied on the information provided that the service fees were necessarily incurred. This disbursement will not be allowed.
(b)Leo Liao’s fees: Leo Liao was briefed for the defendants to give expert evidence on Chinese business practice. This was in response to the evidence of a similar expert briefed for the plaintiff. Objection was taken to this disbursement because the cultural experts, by agreement between the parties, were ultimately not called as witnesses. Mr Hearn submits there is no reason to award disbursements in relation to such an expert as “parties should be incentivised to rationalise evidence where possible”. That submission lacks cogency. The defendants, faced with a situation which the plaintiff had briefed evidence on Chinese business practice, were entitled to engage an expert in that field as was done. To the extent of incurring such a disbursement, the defendants are clearly entitled to seek reimbursement. What I am not satisfied of is the reasonableness of a total disbursement of $22,429.20. A realistic assessment of the proposed evidence on Chinese business practice was that it was going to be of marginal assistance, if any, as
perhaps borne out by the fact counsel reached agreement not to call the evidence at all. I assess a reasonable sum on account of this disbursement to be $8,000.
(c)Two attendances of Mr Whiteside ($1,435): a minor aspect of the fees rendered by the defendants’ accounting expert, Mr Hollis, were two attendances, the first of 30 minutes related to “phase 2 advice to client” and the second (two hours), during trial, being a “meeting with [Mr Hollis] and RB review of info and follow up review”. The defendants did not respond to the plaintiffs’ memorandum challenging those items as not necessarily incurred. As I am not satisfied that they were necessarily incurred, that aspect of the disbursement will not be allowed.
(d)Expert witness fees of Simon Carey: the defendants claimed a disbursement on account of Mr Carey’s fees (for expert accounting evidence) totalling $65,750. That claim was supported by fee notes with brief narrations showing that total amount was charged. Mr Hearn recorded Mr Carey’s fees were 75 percent higher than those charged by the plaintiffs’ accounting expert, Mr Melhuish (who charged
$37,497.51, excluding GST). In response, Mr Ormsby noted Mr Carey was involved earlier than Mr Melhuish in assessing that the subject businesses did not have value. Mr Carey also (unlike Mr Melhuish) undertook analysis in relation to the level of gold holdings to refute plaintiff allegations that gold was missing.
[25] I recognise both from the content of the evidence given at trial by the respective accounting experts and from Mr Ormsby’s additional observations that the range of Mr Carey’s attendances may have significantly exceeded those of Mr Melhuish. That said, I am left overall with the clear impression that the extent of attendances undertaken by Mr Carey were to some extent disproportionate to the circumstances of the proceeding, and therefore may be disallowed under r 14.12(3) of the Rules. My best assessment is that the extent to which the attendances represented by Mr Carey’s
fees were reasonably necessary for the conduct of the proceeding is met by an allowance of $50,000.
[26] Schedule D as attached to this judgment incorporates my conclusions on disbursements.
Outcome
[27] Accordingly, I conclude the defendants are entitled to costs and disbursements in relation to their successful defence of the plaintiffs’ claims as set out in Schedule D to this judgment and the plaintiff is entitled to costs and disbursements on his successful defence of the counterclaim as also set out in Schedule D.
[28] There will accordingly be a single award of costs and disbursements of defendants, offsetting the plaintiffs’ entitlement against that of the defendants.
Order
[29] I order that the plaintiff pay to the defendants on account of the costs and disbursements of the proceeding a total sum of $156,769.50.
Osborne J
Solicitors:
Corcoran French, Christchurch R V G Law, Christchurch
SCHEDULE A
SCHEDULE B
SCHEDULE C
SCHEDULE D
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