Gracewood International Limited v Zhan
[2023] NZHC 3245
•16 November 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-416
[2023] NZHC 3245
BETWEEN GRACEWOOD INTERNATIONAL LIMITED
ApplicantAND
XIANGMING ZHAN
First Respondent
HONGJUN YANG
Second Respondent
Hearing: On the papers Counsel:
M A Corlett KC, I Rosic and Y Lee for Applicant
D M Salmon KC and S J Humphrey for First Respondent
Judgment:
16 November 2023
COSTS JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 16 November 2023 at 3 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date: ...................................
Solicitors: Gilbert Walker, Auckland
Lee Salmon Long, Auckland
Counsel: M A Corlett KC, Auckland
GRACEWOOD INTERNATIONAL LTD v ZHAN [2023] NZHC 3245 [16 November 2023]
Introduction
[1] This judgment determines matters between the parties as to costs and disbursements, following my judgment of 27 February 2023.1
[2] Gracewood is entitled to an award of costs and disbursements having succeeded on its application against Mr Zhan. There is some agreement between the parties on the costs, but considerable dispute about the disbursements, which are substantial.
Costs
[3] Gracewood brought its proceeding by originating application and the costs it is seeking largely reflect steps 37 to 43 allocated for an originating application in the High Court Rules 2016, Schedule 3 (“schedule 3”). In addition, Gracewood claims a sum for step 32, or by analogy with step 32.
[4] It is common ground that category 2 is appropriate. However, there is dispute over the time allocation for some steps and whether second counsel was required (step 43 of schedule 3).
[5] I am satisfied that second counsel was required given the volume of documentation.
[6] As to the matter of time allocation, Gracewood seeks band B for case management steps and appearance at the hearing, but band C for steps 37, 40 and 41. Step 37 is for filing the application and affidavits, 40 is for the preparation of written submissions, and 41 is for the preparation of the bundle for hearing.
[7] Mr Zhan seeks a band A allocation on one case management matter (step 39), and band B for everything else.
[8] I am satisfied that Gracewood is entitled to a greater time allocation than band B permits on the steps in issue. I allow three days on step 37 instead of the two
1 Gracewood International Ltd v Zhan [2023] NZHC 307.
allowed by band B (band C allows six days which is excessive in this case), and band C on steps 40 and 41.
[9] I decline Mr Zhan’s submission for a band A allocation on a case management memorandum. Aside from anything else, the difference is trivial.
[10] Gracewood also claims a sum for its preparation for the hearing. There is no express provision for such a claim in the originating application section of schedule 3. However, as Gracewood submits, there is provision for preparation for hearing in step 32, which is in the part of the schedule headed “Preparing for affidavit hearing”. Alternatively, if a claim under step 32 is not directly available, Gracewood seeks one by analogy pursuant to r 14.5(1)(b).
[11] In support of this submission, Mr Corlett KC, for Gracewood, referred me to Ford v Blundell, in which Edwards J did make a separate award for preparation in a case brought by way of originating application.2
[12] Despite this, I accept the submission of Mr Salmon KC, for Mr Zhan, that Gracewood should not have additional recovery for preparation for hearing. In Edwards J’s case, the trial proceeded as a full hearing, and there appears to have been viva voce evidence. That is different to this case, as the hearing before me was essentially an adjunct to Gracewood’s litigation against Mr Zhan in Hong Kong. Furthermore, the additional time I have allowed for the steps above will be sufficient to cover any shortfall.
Conclusion on costs
[13] To conclude on the matter of costs, the time allocation for each step is as I have noted; I allow for second counsel; and I do not allow the claim for preparation for hearing.
2 Ford v Blundell [2023] NZHC 741.
Disbursements
[14] Gracewood seeks disbursements totalling $184,572.95. There is considerable disagreement as to whether Gracewood is entitled to recover this sum or anything approaching it.
High Court Rules 2016, r 14.12
[15]The relevant parts of r 14.12 provide:
14.12 Disbursements
(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.
(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.
(4)A Judge or an Associate Judge may direct a Registrar to exercise the powers of the court under subclause (2) or (3).
(5)When considering whether a disbursement paid or payable for an expert witness’s fee or expenses is reasonable for the purposes of subclause (2)(d), a Judge or an Associate Judge may—
(a)call for a report or an assessment from a professional organisation or otherwise; and
(b)make any incidental order considered just, including an order as to the cost of that report or assessment.
...
[16] Gracewood submits that the disbursements it claims are within r 14.12(1)(a), as they are expenses Gracewood paid or incurred for the purposes of the proceeding which would ordinarily be charged separately from legal professional services in a solicitor’s bill of costs, and within r 14.12(2) as they are specific to, and reasonably necessary for, the conduct of the proceeding, and reasonable in amount.
Mr Sloan
[17] Gracewood seeks an award of disbursements of $35,727.50 in respect of invoices rendered by Mr Brian Sloan, a private investigator.
[18] Mr Sloan swore an affidavit in the proceeding, summarising his investigations of Mr Zhan and Ms Yang.
[19] Ms Yang is the second respondent. She and Mr Zhan were previously married. Gracewood contended that Ms Yang was holding the substantial assets registered in her name in whole or in part for Mr Zhan.
[20] The purpose of Mr Sloan’s investigations was to identify evidence that might support this contention. No such evidence was obtained. There was no evidence that Ms Yang was holding assets for Mr Zhan, nor that she and he were other than they said, that is separated but on good terms. I declined Gracewood’s application against Ms Yang accordingly.
[21] I am not satisfied that Mr Sloan’s costs were reasonably necessary for the conduct of the proceeding. Moreover, I think it must have been reasonably obvious at
an early stage that those investigations were not going to yield useful evidence. I decline Gracewood’s claim accordingly.
Beattie Varley Ltd
[22] Gracewood seeks $12,326 in respect of invoices rendered by Beattie Varley Ltd to Howse Williams, Gracewood’s solicitors in Hong Kong. Beattie Varley is a specialist investigation and accounting firm.
[23] In October 2021, Howse Williams instructed Beattie Varley to investigate and ascertain the assets presently held by Mr Zhan and Ms Yang, together or separately, in New Zealand and/or overseas, and the manner in which they have dealt with their assets here.
[24] Whilst I am satisfied that Beattie Varley’s costs, insofar as they relate to Mr Zhan, are recoverable, I am also satisfied they would have been modest. I allow
$2,500 of the sum claimed.
Mr Scott SC and Mr Yip
[25] Gracewood seeks to recover a disbursement of $83,321.25 for attendances by Mr John Scott SC and Mr Richard Yip, lawyers in Hong Kong.
[26] Mr Scott swore an affidavit in the proceeding in reply to evidence from Mr Jeremy Bartlett SC, another expert legal practitioner in Hong Kong. Mr Bartlett’s evidence was of considerable importance, as it was to the effect that any liability Mr Zhan may have had to Gracewood had been discharged on his discharge from bankruptcy in 2009.
[27]Mr Yip assisted in the preparation of Mr Scott’s affidavit.
[28] Mr Salmon submits that Mr Scott’s evidence ought not to have been filed at all as there was no provision for reply evidence, nor was the filing of the evidence permitted under the rules. Alternatively, Mr Salmon submits the fees are unreasonable in amount and that I should reduce them by 75 per cent.
[29] Gracewood does not accept the submission that it ought not to have filed evidence in reply, let alone that the point could be relevant to its recovery of this disbursement. As to quantum, Gracewood relies on an affidavit from Ms Eviana Leung of 3 May 2023, who is advising Gracewood in its Hong Kong proceedings. On this particular issue Ms Leung’s evidence is to the effect that Mr Scott’s and Mr Yip’s daily rates are “well in line” with others of their experience and expertise; are similar to those charged by Mr Bartlett and his junior; that in fact Mr Scott and Mr Yip reduced their fees; and that the fees are reasonable by Hong Kong standards.
[30] I am satisfied that Gracewood is entitled to claim this disbursement, whatever the rights and wrongs of when counsel for Gracewood filed the evidence. Further, given Ms Leung’s evidence that the fees charged are reasonable by Hong Kong standards, I have no basis on which to hold otherwise. I allow this disbursement accordingly.
[31] If it is of any assistance to Mr Zhan, I note that he is likely to seek a variation to the freezing order I granted so that he is able to meet legal costs he incurs in the Hong Kong proceedings. Given Mr Scott’s and Mr Yip’s fees, I have every expectation those costs will be substantial. In short, this particular matter “cuts both ways”.
Howse Williams re Ms Leung’s 2022 affidavits
[32] Ms Leung swore two affidavits in the proceeding. At the time she did so, Ms Leung was a partner in Howse Williams, and advising Gracewood on the steps it might take to recover from Mr Zhan. Gracewood claims $29,866.17 for Ms Leung’s and her assistant’s attendances in respect of those affidavits.
[33] Mr Salmon submits this item is not properly claimed as a disbursement. The essence of his first submission is that Howse Williams’ attendances were as Gracewood’s solicitors in Hong Kong, and that Gracewood is essentially seeking to foist on Mr Zhan some of their fees as part of that engagement, in the guise of a disbursement. His second submission is that Ms Leung gave evidence as a witness of fact and her costs are not recoverable as such, and to the extent she gave evidence as an expert she was not independent.
[34] I am satisfied that Ms Leung’s evidence was necessary in the context of Gracewood’s proceeding here, and I do not accept either of Mr Salmon’s submissions insofar as this claim is confined to the attendances required for that purpose. As matters stand, however, I do not accept that all of the attendances claimed were so required. For instance, the claim seems to include time for matters such as arranging company searches and emailing Gracewood about them which, as Mr Salmon submits, would have been required regardless of the proceeding here. Likewise, attendances on Gracewood regarding the New Zealand proceeding. Those types of attendance are not to Mr Zhan’s account and should be excluded.
[35] Given that, Gracewood is to reconsider Howse Williams’ invoices and confine this claim to those relating strictly to preparing the affidavits, erring on the side of caution.
Other disbursements
[36] Gracewood also claims $14,247.61 for disbursements such as searches, courier fees, and photocopying, largely rendered by Howse Williams.
[37] Mr Salmon does not dispute these claims in principle but submits that the sum invoiced is excessive and should be reduced. I decline to reduce the sum claimed, as there is no basis on which I am able to say the costs are unreasonable in amount.
Conclusion on disbursements
[38] I decline to approve Mr Sloan’s fees; I reduce the sum claimed for Beattie Varley to $2,500; and I direct counsel for Gracewood to confine the claim in respect of Howse Williams to attendances strictly in respect of the preparation, affirming and filing of Ms Leung’s evidence in the proceeding, erring on the side of caution. I reserve leave to apply to the Registrar in the unlikely event of residual dispute. I approve all other disbursements claimed.
Peters J
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