Griffin Trust AG v Global Oil Services Ltd

[2019] NZHC 3418

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1194

[2019] NZHC 3418

BETWEEN

GRIFFIN TRUST AG

First Plaintiff

ANDREW BAKER
Second Plaintiff

AND

GLOBAL OIL SERVICES LIMITED

First Defendant

ZIEDONIS PERKUNS
Second Defendant

ANTONIA KYRIAKOU

Third Defendant

HARDIJA VAIVADE

Fourth Defendant

Hearing:

On the papers

Counsel:

T P Mullins and J P Cundy for the Plaintiffs

P W David QC and S E Wroe for the Defendants

Judgment:

19 December 2019

COSTS JUDGMENT OF ASSOCIATE JUDGE BELL

This judgment is delivered by me on 19 December 2019 at 11:00 am

pursuant to r 11.5 of the High Court Rules.

.....................................................

Registrar / Deputy Registrar

Solicitors / Counsel:

Lee Salmon Long, Auckland Wilson Harle, Auckland Paul David QC, Auckland

S E Wroe, Barrister, Auckland

GRIFFIN TRUST AG v GLOBAL OIL SERVICES LTD [2019] NZHC 3418 [19 December 2019]

[1]    This proceeding started in June 2018. The plaintiffs filed a discontinuance in October 2018. The costs of the proceeding have not however been decided. The defendants filed a memorandum as to costs in January 2019. The plaintiffs filed a memorandum in response in March 2019 and the defendants in turn filed a memorandum in reply. Last week I was given the file to decide costs. I do not know why the costs matter was not decided earlier and I do not speculate. Nevertheless, it is unsatisfactory that the costs question has languished. The parties must have been inconvenienced. There are no excuses. On behalf of the court I apologise to the parties for the delay.

What the case was about

[2]    As its name suggests, AS Latvijas Naftas Tranzits is a Latvian oil company. It operates an oil terminal and pipelines. It was established in the 1990s when the state- owned enterprise, Ventspils Nafta, was privatised. This case concerns a 37 per cent shareholding in the company. The shares were to be held for four Latvians: Mamerts Vaivads, Uldis Pumpurs, Jans Blazevics and Aivars Lembergs. Worried about potential instability in Latvia, they arranged for the shares to be held on their behalf outside Latvia, including by a Liechtenstein trust and a New Zealand company, Global Oil Services Ltd. The arrangements are not straightforward.

[3]    Disputes arose. The Vaivads family allege that the plaintiffs, who were responsible for the trust arrangements, did not act in the interests of the beneficiaries, but are allied with Ventbunkers, which holds most of the shares in AS Latvijas Naftas Tranzits. The Vaivads have taken proceedings in the Latvian courts. The plaintiffs, on the other hand, a Liechtenstein trustee company and its director, say that the Vaivads family has improperly taken control. Part of the dispute is about control of the New Zealand company, Global Oil Services Ltd. That may go to who has control of the 37 per cent shareholding in AS Latvijas Naftas Tranzits.

[4]    Global Oil Services Ltd, the first defendant, was the legal owner of the shares in AS Latvijas Naftas Tranzits, at least until differences arose. According to the plaintiffs, Global Oil Services Ltd held the shares as nominee/bare trustee for Griffin

Trust AG under a declaration of trust of April 2003 and a second declaration of February 2012.

[5]    Griffin Trust AG, the first plaintiff,  is  a  Liechtenstein  trustee  company.  Mr Baker, the second plaintiff, also from Liechtenstein, is its director.1 From 2003 to 2010, Griffin Trust AG was the trustee of the GOS Trust, which was established in September 2003. Although the settlor is a company incorporated in the Turks and Caicos Islands, it is a Liechtenstein trust and was registered in the Liechtenstein public register of trusts. The GOS Trust was for the benefit of the four Latvian beneficiaries in paragraph [2] above.

[6]    In 2010, Griffin Trust AG closed the GOS Trust and had it taken off the public register. It says that notwithstanding deregistration of the trust, Global Oil Services Ltd continued to hold the shares in AS Latvijas Naftas Tranzits on trust for it and it held the beneficial interests on trust for the Latvian beneficiaries in equal shares.

[7]    Since 2012 the shareholders of Global Oil Services Ltd have been Salfotex Ltd, a Cypriot company associated with the Vaivads family with a 62.5 per cent shareholding and SIA Zaksi, a Latvian company associated with Uldis Pumpurs with a 37.5 per cent shareholding. Mr Baker was sole director of Global Oil Services Ltd from 2003 to 2015.

[8]    Differences started in 2015. Ms Vaivade, the daughter of Mamerts Vaivads, was on the supervisory board of AS Latvijas Naftas Tranzits. She says that an opportunity to sell the shares of Global Oil Services Ltd came up. Uldis Pumpurs agreed with the idea, but Mr Baker would not give them a power of attorney to negotiate the sale. They lost confidence in him and resolved to remove him as director. New directors were appointed: the second, third and fourth defendants. Mr Ziedonis Perkums, with both Latvian and New Zealand citizenship, lives in Auckland, Ms Antonia Kyriakou, a Cypriot, lives in Nicosia, and Ms Vaivade lives in Riga. Mr Baker asked for the shares in AS Latvijas Naftas Tranzits to be transferred to Griffin Trust AG, relying on the second declaration of trust, but the new directors say that they know nothing of this trusteeship and refused to transfer the shares. They say that,

1      Formerly an English solicitor.

notwithstanding that, Mr Baker managed to have Griffin Trust AG recorded as a shareholder of AS Latvijas Naftas Tranzits in place of Global Oil Services Ltd. They do not accept that the transfer was valid under Latvian law. Global Oil Services Ltd has brought proceedings in Latvia challenging the change of shareholding. Mr Baker is now on the supervisory board of AS Latvijas Naftas Tranzits. Ms Vaivade says that would be possible only with the co-operation of Ventbunkers. Ms Vaivade says that her family is acting in the interests of all four Latvian beneficiaries, but that is in contention.

The proceeding

[9]    In this proceeding Mr Baker alleged that his removal as director of Global Oil Services was invalid and sought reinstatement. Griffin Trust AG sued Global Oil Services Ltd for breach of trust for refusing to transfer the AS Latvijas Naftas Tranzits shares to it and sought a declaration that a power of attorney to Ms Vaivade to act generally on behalf of the company was invalid. It also sued the three new directors for knowingly assisting breaches of trust by Global.

[10]   The plaintiffs did not seek leave to serve the proceeding outside New Zealand, relying instead on the gateways under r 6.27(2)(b), (d), (f) and (h)(i) of the High Court Rules 2016. In response the second, third and fourth defendants filed an appearance under protest to jurisdiction and applied to dismiss the proceeding on forum non conveniens grounds and for absence of a reasonably arguable first cause of action. Global Oil Services Ltd was also a party to the appearance, saying that it abided the court’s decision on the dismissal application.

[11]   The application was to be heard on 19 November 2018. The plaintiffs sought an adjournment, saying that they wished to amend their pleading and to add other parties. Edward J declined the adjournment application and gave fresh timetabling directions. On the day before they were to file their notice of opposition and affidavits, the plaintiffs discontinued.

The parties’ positions on costs

[12]   The plaintiffs accept that the defendants should have costs on the discontinuance.   They do not suggest that the court should order otherwise under     r 15.23 of the High Court Rules 2016. The parties are, however, far apart on the amount. Initially the plaintiffs offered $4,514.00 under category 2 band B for all steps, plus disbursements. They later changed that to $8,474.00, the only change being to allow band C for filing the interlocutory application. The plaintiffs said that they should pay these disbursements:

Filing fee on appearance	$110.00
Filing fee on interlocutory application	$500.00
Fee for translator and Notary	€96.80
International couriers	€290.56

[13]   The defendants filed an affidavit by an expert on Latvian law. The plaintiffs object that his fee of €14,237.75 is too high.

[14]   On the other hand, the defendants seek indemnity costs of $97,073.85. Failing that, they seek increased costs and, failing that, scale costs under category 3. They also seek full recovery of the fee of the Latvian expert.

Scale costs

[15]   Under r 14.3(1) of the High Court Rules, this is a category 3 proceeding. The case was undoubtedly significant. A judgment would determine who had control of Global Oil Services Limited. Its shareholding in AS Latvijas Naftas Tranzits was valuable. In a proceeding in Latvia at the behest of the Vaivads against Ventbunkers the shareholding was claimed to be worth €26,288,000.

[16]   The proceeding was complex. While the plaintiffs’ causes of action were unremarkable in this court, the case would deal with the laws of Latvia and Liechtenstein. While Liechtenstein has a law of trusts (unlike most European jurisdictions), it is different from the law of trusts originally developed in the Court of Chancery. As an example, the court would need to ascertain the effect on Global Oil

Services Limited of the closure of the GOS Trust. Liechtenstein and Latvia have civil legal systems. While lawyers trained in the common law tradition can readily understand the substantive laws of other common law jurisdictions, understanding the laws of civil legal systems is much more challenging. While both common law and civil law systems may reach roughly similar results, the substantive principles and procedural rules are quite different.

[17]   In New Zealand terms the trust structures set up for the shares in AS Latvijas Naftas Tranzits to be held by Global Oil Services Limited  on  trust  for  Griffin Trust AG, itself a trustee, was relatively complex. How they operated in an international context was not straight-forward.

[18]   There is also the matter of language differences. Some of the deponents have given their evidence in Latvian.

[19]The plaintiffs accept that the defendants took these steps in the proceeding

Step no.	Description of what was done
8	Notice of appearance with protest of jurisdiction
22	Filing, interlocutory application to dismiss
11	Filing, memorandum for mention on 31 August 2018
12	Appearance at mention on 31 August 2018
11	Memorandum for mention on 18 October 2018
12	Appearance at mention on 18 October 2018

[20]The defendants have claimed for these other steps:

Step no.	Description of what was done
2	Commencement of defence (2 days)
30/37	By analogy allowance for affidavits (4 days)
11	Considering memorandum but not filed (.2 of a day)

[21]   The defendants’ claims for commencement of defence and for work on affidavits are not expressly allowed, when no statement of defence was filed and the plaintiffs discontinued without filing opposition to the dismissal application. These

claims are therefore extras and will be considered as a claim for increased costs under r 14.6. I consider that below.

[22]   I do not allow for the extra step 11. The document was not filed in court. It is not customary to allow for steps that do not result in a document being filed in court.

[23]   I allow band C for both the notice of appearance and filing the interlocutory application. The plaintiffs propose band B for filing the notice of appearance. While the appearance is a relatively short document, I accept that on the defendants’ side there was considerable preparation for the challenge to jurisdiction that goes far beyond drafting the document. The defendants were foreign and English was not their first language. Considerable time was required to take instructions and give advice on challenging the jurisdiction.

[24]I calculate scale costs as follows:

No. of step	Description   of    step    in    the proceeding	Category time band	No. of days	Costs
8	Notice of appearance with protest to jurisdiction	C	2 days	$6,600.00
22	Filing interlocutory application	C	2 days	$6,600.00
11	Appearance at mention on 31 August 2018	B	.2 day	$660.00
11	Memorandum for mention on 18 October 2018	B	.4 day	$1,320.00
12	Appearance at mention on 18 October 2018	B	.2 day	$660.00
4.8 days	$15,840.00

Increased costs under r 14.6

[25]   Under r 14.6(3) the court may order a party to pay increased costs if the nature of the proceeding or a step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C. Here I deal with the claims for commencing the defence and preparing affidavits.

[26]   The defendants have not put their lawyers’ time records before the court to show the time spent on these steps, but I readily accept that the time spent must have been much more than has been claimed. Considerable time must have been required to get to grips with the facts of the case, the laws of three jurisdictions, two of them civil law, and establishing how they related to each other. Obtaining the information, analysing it and working out a strategy to respond were not straightforward.

[27]   It is proper to allow for preparation of the defence, even though no statement of defence was filed. After all, if forum non conveniens is to be properly argued, the court needs to know what will be in issue.2 The defendants clearly prepared on the substantive issues.

[28]   The affidavit preparation was significant. None of the defendants’ deponents were in New Zealand. Mr Perkuns swore his affidavit in Australia, Ms Kyriakou swore hers in Cypress, and Ms Vaivade swore hers in Riga. Mr Vaivads normally lives in Austria but swore his in Riga. He swore his affidavit in Latvian. It had to be translated. The defendants also obtained an affidavit as to Latvian law by a Latvian lawyer. His affidavit relevantly addresses forum non conveniens issues and whether the courts of Latvia are an alternative forum for this proceeding. He could not have prepared that affidavit without being carefully briefed on the New Zealand proceeding. Given the difference in the time zones, someone must have worked late at night, and I suspect that was in New Zealand.

[29]The plaintiffs are properly entitled to the extra six days they have claimed:

$19,800.

Increased costs for enforcement

[30]   The plaintiffs are based in Liechtenstein and are not known to have any place of business or assets in New Zealand. It is unlikely that any New Zealand costs order can be enforced against them anywhere except in Liechtenstein. There is no assurance that the courts of Liechtenstein would apply common law principles for the

2      Turn and Wave Ltd v Northstar Accounts Pty Ltd HC Auckland CIV-2010-404-2268, 23 December 2010 at [82]; Haines v Herd [2015] NZHC 3365 at [49].

recognition of foreign costs orders.3 Enforcing the costs order against the plaintiffs in Liechtenstein is not likely to be straight-forward or easy. All going well for them, the defendants may recover their costs incurred in instructing Liechtenstein lawyers. That will be a matter of Liechtenstein law. But their New Zealand lawyers will need to instruct Liechtenstein lawyers on enforcing the order. That may include having the order translated into German and advising the Liechtenstein lawyers on the effects of the order under New Zealand law.

[31]   The question here is whether the defendants can recover their New Zealand costs of enforcement. If the defendants could enforce the orders in New Zealand, they could recover costs under the High Court scale.4 Enforcing overseas is more difficult and time-consuming. By analogy under rr 1.6 and 14.5(1) of the High Court Rules, the defendants should have an allowance for the costs of their New Zealand lawyers in taking steps to enforce the costs order in Liechtenstein. I fix that amount at two days, $6,600, under r 14.6(3)(d). That will be payable only if the plaintiffs do not pay the order for costs by 28 February 2020.

Indemnity costs

[32]   The defendants seek indemnity costs under r 14.6(4)(a) claiming the plaintiffs acted vexatiously, frivolously, improperly or unnecessarily in commencing the proceeding. The thrust of their submission is that the proceeding was misconceived from the outset. The proceeding was unnecessary because the plaintiffs did not consult with the beneficiaries before starting. The explanation given by the plaintiffs for discontinuing does not stand up. The proceeding was designed to thwart the legitimate steps taken by the defendants in suing in Latvia to uphold the interests of all the beneficiaries.

[33]   To accept that submission requires me to come to a view on the ultimate merits of the case. I am unable to do so. There are pointers going both ways. It is not clear that the Latvian proceedings were for the benefit of all the beneficiaries. Two of them,

3      For example, the principle that the plaintiffs have submitted to the jurisdiction of the New Zealand courts by suing here.

4      See High Court Rules Schedule 3 for the time allocations for liquidation, bankruptcy proceedings and judgment enforcement (steps 59-62).

Mr Pumpurs and Mr Blazevics, say they supported the plaintiffs’ proceeding. The plaintiffs’ proceeding was directed at obtaining determinations in respect of a New Zealand company. New Zealand is more often than not the appropriate forum in which to decide questions about New Zealand companies. The defendants, as directors of a company incorporated under the New Zealand Companies Act 1993, can be taken to accept that the laws of New Zealand should apply to them as directors.5 While the defendants had arguments that Latvia was the appropriate forum, I cannot say that suing in New Zealand was vexatious or improper.

[34]   Indemnity costs under r 14.6(4)(a) are not the norm. This case is not so serious that the plaintiffs should be condemned for starting this proceeding in New Zealand. The application for indemnity costs fails.

Costs on the costs application

[35]   This is an appropriate case for the defendants to have costs on the costs application, but I am sympathetic to the plaintiffs’ complaint that the defendants overdid it with not only a very full memorandum and extensive supporting schedules, but also affidavits. In the circumstances, I allow .4 of a day under category C for preparing the costs application - $1,320.

Disbursements

[36]   The plaintiffs accept all the disbursements claimed by the defendants, except the expert’s fee, €14,237.75. I am satisfied with the expert’s fee. While his affidavit is ten pages long, it was carefully prepared. When considered in the light of expert evidence on foreign law I have read recently, it is among the better affidavits. I see no reason to regard the fee as unreasonable or to discount it. It was important evidence for the challenge to jurisdiction.

[37]The plaintiffs have converted all their disbursements into New Zealand dollars:

$26,370.18.

5      Grant v Pandey [2013] NZHC 2844 at [17].

Summary

[38]I fix costs payable on the discontinuance:

Scale costs	$15,840
Increased costs	$19,800
Costs on costs application	$1,320
Sealing order	$660
Sub-total	$37,620
Disbursements	$26,370.18
Total	$63,990.18

Those costs are payable from the date of this decision. If the costs are not paid in full by 28 February 2020, a further sum of $6,600 will be payable as increased costs for enforcement.

Associate Judge R M Bell