He v Chen

[2024] NZHC 3988

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2014-404-3369

[2024] NZHC 3988

BETWEEN

YAO WE HE

Plaintiff

AND

ZHIXIONG CHEN

Defendant

Hearing:

On the papers

Counsel:

Self-represented Plaintiff

C Jiang and K Mills for Defendant

Judgment:

20 December 2024

COSTS JUDGMENT OF BECROFT J

This judgment was delivered by me on 20 December 2024 at 2pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

Solicitors:

Tompkins Wake, Auckland Copy to: Y He, Auckland

HE v CHEN [2024] NZHC 3988 [20 December 2024]

Application

[1]This is a civil costs application.

Context

[2]        The substantive issues between the parties arose in the context of a breakdown in the business relationship between the plaintiff, Mr He, and the son of the defendant. Together, the pair exported New Zealand infant milk formula to Hong Kong and China.

[3]        Mr He issued proceedings against Mr Chen Snr on 23 December 2014 essentially claiming (amongst other things) that their relationship could be characterised as a joint venture. Mr He regarded Mr Chen Jnr as an underling. He maintained his real business relationship was with Mr Chen Snr.

[4]        Due to a series of delays and procedural skirmishes, the substantive hearing was only heard in February 2024 in a 12-day hearing before me. I delivered my judgment on 14 June 2024.1

[5]        Mr He’s claim failed on each of the five causes of action he alleged. He was unable to satisfy his burden of proof given the lack of documentary evidence and the time that had passed since the relevant events, which made exact memory recall very difficult.

Procedural history as to costs

[6]        I was hopeful that the parties would be able to agree costs. That has not been possible.

[7]        On 3 July 2024, counsel for the defendant filed a “procedural” costs memorandum. Counsel requested a two-week extension to the 5 July 2024 timetabling direction for Mr Chen Snr to file a costs memorandum. That extension was sought to

1      He v Chen [2024] NZHC 1565.

enable counsel to locate all relevant invoices and receipts. I granted the extension on 5 July 2024.

[8]        On 19 July 2024, counsel for Mr Chen Snr filed a full memorandum in relation to costs.

[9]        My minute of 5 July 2024 had directed Mr He to file his reply memorandum within 15 working days from receipt of the defendant’s memorandum. Mr He failed to do so. And he did not reply to counsel for Mr Chen Snr’s email of 13 August 2024 enquiring when he would file a reply memorandum.

[10]      In light of that default, on 26 August 2024, counsel for Mr Chen Snr filed a memorandum requesting the Court make an order that unless Mr He filed his costs memorandum by 6 September 2023, then the 2B scale costs and the disbursements claimed by Mr Chen Snr would be granted by default.

[11]      On 5 September 2024, Mr He sought an extension of time to enable him to file his memorandum. He informed the Court that he had only just retained counsel to advise him on the issue of costs.

[12]On 6 September 2024, I granted that extension.

[13]      I am now in possession of both parties’ memoranda as to costs. This judgment determines the costs issue.

Defendant’s submissions

[14]      Mr Chen Snr seeks 2B scale costs in the amount of $150,067, and disbursements of $113,589.80. The costs award sought would total $263,656.80.

[15]      Mr Jiang, for Mr Chen Snr, understands that the Court presently holds $30,000 that was paid by Mr He as security for costs.2

2      The parties originally agreed for Mr He to pay $10,000 into court, per a joint memorandum dated

2 November 2015. The  parties  subsequently  agreed  further  security  of  $20,000  in November 2017, which was ordered by consent on 23 November 2017 by Doogue AJ, and paid into court on 9 May 2018.

[16]      Costs on interlocutory applications, although ordinarily fixed following the outcome of the application, can be reserved in certain circumstances, as they were following issue of Sargisson AJ’s judgment.3

[17]      Mr Chen Snr seeks costs for second counsel at the hearing on the basis that second counsel was justified and necessary. In support of that submission, Mr Jiang argues the proceeding was factually complex, involved a large number of documents, and it was against a self-represented litigant.

[18]      Mr Hayes (as second counsel) prepared a large amount of the discovery and the common bundle. He also electronically navigated the common bundle (equivalent to 14 hardcopy volumes) at the hearing. Mr Jiang correctly notes that I recorded my appreciation for Mr Hayes’ assistance with these bundles in my judgment:

[55] The casebook for this hearing comprised a massive 14 large volumes, with supplementary material. It had been prepared by the defendant’s lawyers, using documents mainly provided by Mr He who had used a confusing numbering system. It was all re-numbered and indexed in hard copy by the defendant’s lawyers. Most helpfully, it was also all computerised, indexed and easily accessible using computer screens and a system provided by the defendant’s lawyers and operated by Mr Hayes. It proved invaluable.

[19]      In respect of memoranda filed, Mr Chen Snr seeks costs for those memoranda prepared by his counsel (including joint memoranda), but not for joint memoranda prepared by Mr He’s solicitors. Costs on a 2B basis are also sought for filing the memorandum on costs.

[20]      Mr Jiang excluded costs previously awarded in relation to interlocutory applications.

[21]      Mr Jiang maintains there are grounds in this case for Mr Chen Snr to seek increased costs against Mr He.4 However, for the sake of resolving all issues and “moving on”, Mr Chen Snr is content with 2B scale costs.

3      He v Chen [2019] NZHC 2390.

4      Counsel highlights r 14.6(3)(a) (time required for the proceeding or a step substantially exceeds band C); r 14.6(3)(b)(ii) (taking or pursuing an argument that lacks merit); and r 14.6(3)(b)(iii) (failing to admit facts, evidence or documents, or accept a legal argument).

Plaintiff’s submissions

[22]      Mr He drew my attention to several items claimed by the defendant, which he says should not be awarded.

[23]      Mr He says that Mr Chen Snr, in seeking $956 for the filing of a costs memorandum, is essentially seeking “costs on costs”. While this Court does have jurisdiction to award those costs, Mr He says that multiple cases have observed that the Court may be reluctant to award costs on costs.5 In this case, because the matters that arise are relatively straightforward, Mr He says there is no reason to award costs on costs.

[24]      Mr He also raises the following issues in relation to specific invoices from EMC Professional Services Ltd included in Mr Chen Snr’s disbursements claim:

(a)Mr He has been unable to locate invoice number 12178 for the relevant

$103.50 amount.

(b)Invoice number 12701 does not appear to relate to this case. The invoice description records the name “Zhenzhen Hu” as the “client reference”.  Mr  He  understands  the  Mr Hu  is  another  client  of  Mr Chen Snr’s lawyer.

(c)Invoice number 12719 includes translation work that Mr He says was not reasonably necessary for the conduct of the proceeding. Accordingly, Mr He submits that there should be a 20 per cent deduction of this disbursement.

[25]      Mr He says the claim for $2,602.98 for “Tompkins Wake IT costs (electronic bundle/court room set up)” should not be allowed. Based on the description, Mr He understands that Mr Chen Snr is claiming for fees that his lawyers billed him for creating the casebook and setting up the courtroom computer system. Mr Chen Snr is already claiming costs under step 33A for “additional allowance for whichever party prepared [the] common bundle”. Therefore, Mr He says that he should not be able to

5      See for example Jeffreys v Morgernstern [2013] NZHC 1361 at [40]; DGL Manufacturing Ltd v Simmonds [2022] NZHC 1434 at [18]; and Legler v Formannoij [2022] NZHC 1804 at [12].

increase his recovery by framing these services as a disbursement claim. Mr He also challenges any claim being allowed for “IT services”, given these are generally commonplace and are subsumed with the provision made in the rules for professional time.

Defendant’s reply submissions

[26]      In the circumstances, given the duration and number of steps in the proceeding, and the time taken to tabulate and calculate scale costs items (excluding costs already addressed by previous orders or directions), Mr Jiang maintains it is appropriate to award scale costs for the filing of the defendant’s costs memorandum.

[27]      In relation to the specific invoices from EMC Professional Services Ltd challenged by Mr He, Mr Jiang replies:

(a)A copy of invoice number 12187 has now been provided to both the Court and plaintiff. Counsel apologies for the oversight in not previously having included this invoice.

(b)Invoice number 12701 was inadvertently included in the disbursement’s calculation. A deduction of $115.00 ought to be made from the total disbursements originally claimed.

(c)The relevant two documents that are the subject of invoice 12719 were both referred to in evidence and in submissions. It was accordingly appropriate to accord this invoice its full value for the purposes of awarding disbursements.

[28]      Turning to Mr He’s assertion that setting up the courtroom to facilitate the use of the electronic bundle should not be recoverable, Mr Jiang says that in the event Tompkins Wake had not provided this service, it would have been necessary to engage an external provider (as it is not provided for by the Court). Mr Jiang says it is not a standard administrative function or service charged for as part of “information technology services” or captured by an award of scale costs for preparation of the trial bundle.

[29]      Applying the deduction for invoice number 12701, Mr Chen Snr claims costs and disbursements totalling $263,541.80.

Decision

[30]      I remind myself that while costs are at the discretion of the Court,6 the legislative regime provides guidance on the exercise of that discretion.

[31]      The normal principle that costs follow the event applies in this case. The starting point should be costs on a 2B scale in favour of Mr Chen Snr—being the successful party at trial.

[32]      I do not allow the sum of $956 for the filing of the costs memorandum. Given the errors identified in the defendant’s initial memorandum, identified by Mr He, I consider it is fair for the defendant to bear the cost of this step. I note that this $956 amount was not included in the defendant’s schedule of steps taken in the proceeding (despite the submissions recording it was). Therefore, I do not need to reduce the total costs claimed by this amount.

[33]      I note that invoice 12701 should be discarded. I reduce the total disbursements claimed by $115.

[34]      Contrary to Mr He’s submission, in my view, second counsel in this case was not only helpful, but essential. It would have been hard to imagine completing the trial within the allotted timeframe without the assistance of Mr Hayes and the electronic bundle. Furthermore, Mr He’s documents were, understandably, significant and not tabulated in a way that assisted the Court.

[35]      In all those circumstances, I am quite satisfied that the assistance of second counsel was of significant value to the hearing and in ensured it was completed on time. I am prepared to allow costs for second counsel.

6      High Court Rules 2016, r 14.1(2).

[36]      However, I am not prepared to award the $3,602.98 disbursement claimed for “Tompkins Wake IT costs (electronic bundle/court room set-up)”. The invoice provided to support this disbursement records, “IT costs for setting up and packing down at trial, including travel costs and accommodation”. There are no further receipts provided to particularise that disbursement. I do not know what travel costs or accommodation are also being claimed within this figure. In these circumstances, I decline to award the disbursement.

[37]      Subject to those deductions, the costs claimed by Mr Chen Snr are reasonable and appropriate. I also record that the invoices relating to translation work, concern documents that were referred to in the hearing and in submissions. Accordingly, those disbursements are reasonably claimed. I also note there are significant but reasonable costs for the retention and advice of experts. The accounting paperwork relied on by Mr He was very confusing, handwritten, and incomplete. Only an expert could have deciphered it, let alone attempted its reconciliation.

[38]      This was a long-running claim by Mr He, no doubt entirely justified in his own mind, but essentially destined for failure given the lack of clear documentation, independent evidence, and the passage of time which made it virtually impossible to determine which version of events and whose assessment of the business relationship should be accepted.

[39]      This was all set out in my judgment and there is no need for me to repeat it here. I only refer to it because, in my view, it amply justifies an award of costs in this case. The 2B costs sought are reasonable and, in some respects, I accept the defendant’s submission that they have been kept to a minimum (or at least pared back).

Result

[40]I order costs in the sum of $150,067, plus disbursements of $109,871.82.

Becroft J