New Zealand Steel Limited v Minister of Commerce and Consumer Affairs

[2018] NZHC 3133

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV 2017-485-714

[2018] NZHC 3133

BETWEEN

NEW ZEALAND STEEL LIMITED

Plaintiff

AND

MINISTER OF COMMERCE AND CONSUMER AFFAIRS

Defendant

On the papers
Judgment:	30 November 2018

JUDGMENT OF MALLON J

(Costs)

Introduction

[1]    The applicant (NZ Steel) sought judicial review of a determination made by the respondent (the Minister) under the Dumping and Countervailing Duties Act 1988. The determination was that Chinese galvanised steel coil manufactured in China and exported to New Zealand was being subsidised to de minimis levels only and therefore not causing material injury to the domestic industry here. I found in favour of NZ Steel and quashed the Minister’s decision.1

[2]    I indicated a preliminary view that costs should be ordered in NZ Steel’s favour on a category 3B basis.2 The parties have agreed to this and to the calculation of those costs. The sole issue is whether NZ Steel’s disbursements for experts’ fees are fully recoverable. These fees total $119,723.04 and are made up as follows:

1      New Zealand Steel Limited v Minister of Commerce and Consumer Affairs [2018] NZHC 2454.

2 At [259].

NEW ZEALAND STEEL LIMITED v MINISTER OF COMMERCE AND CONSUMER AFFAIRS [2018] NZHC 3133 [30 November 2018]

(a)Mr Gospage (evidence on the international law and practice of trade remedies and subsidy investigations): $82,705.97;

(b)Professor Lardy (evidence on the role of the state in Chinese political- economy): $35,642.07; and

(c)Dr Scholz (evidence about the galvanised steel coil and the Minister’s “like goods” determination): $1,375.00.

[3]    The respondent says these disbursements are not recoverable because they were not reasonably necessary for the conduct of the proceedings and because they are not reasonable in amount.

The High Court Rules

[4]    The recoverability  of  disbursements  in  legal  proceedings  is  governed  by r 14.12 of the High Court Rules 2016. It provides:

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.

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.

…

[5]    Expert fees are a disbursement in the sense that they are 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.3 However, since they are not listed in the non-exhaustive list of specified recoverable disbursements  at   r 14.12(1)(b),   they   must   be   approved  by   the   court   under r 14.12(2)(a)(i). In order to be approved they must be “specific to” and “reasonably necessary for” the conduct of the proceeding, and reasonable in amount.

Reasonably necessary

[6]    The first issue is whether the expert fees in this case were reasonable necessary for the conduct of the proceeding. The respondent says they were not because judicial review proceeds on the evidence that was before the decision-maker, none of the expert evidence adduced on the judicial review application was before the decision- maker and this was reflected in my view of that evidence.

[7]    My judgment commented on the evidence of Professor Lardy and Mr Gospage in this way:

[230]     NZ Steel has provided an affidavit from Professor Nicholas Lardy, an economics expert with particular expertise in China. He has written eight

3      McGechan on Procedure (online looseleaf ed, Thomson Reuters NZ) at [HR14.12.01].

books on the Chinese economy and has contributed to the chapters of many more books. He discusses evidence that suggests there is large-scale subsidisation of certain industries in China, including the steel industry. He discusses why that is. He discusses the unprofitability of enterprises such as those supplied hot rolled and cold rolled coil and says the GOC is “providing indirect subsidies through the state-dominated system that allows these firms to sell products at less than the cost of production, seemingly year after year” which is a program that allows these producers to sell inputs at LTAR.

[231]     The information from Professor Lardy or the books he refers to may certainly have assisted MBIE. However it is like the verification visits. MBIE was not required to carry out its investigation in any particular way. It was required to adopt a robust and fair investigation aimed at arriving at a determination based on reliable facts but the manner in which it did so was open to MBIE. If NZ Steel wanted MBIE to take into account Professor Lardy’s evidence, it should have submitted that evidence during MBIE’s investigation. There is no error per se in MBIE not sourcing this kind of evidence of its own volition. It is more illustrative of the kind of evidence MBIE could resort to when faced with limited cooperation from the GOC and Chinese producers.

[232]     NZ Steel also filed a detailed affidavit from Stephen Gospage. He has extensive EC experience, specialising in subsidy and countervailing duty issues as an investigator; as the EU’s representative on the WTO committees and informal expert groups; and in EC policy work amongst other things. His affidavit critiques MBIE’s analysis, its failure to carry out a verification visit of Zong Cheng at least (as the sole cooperating producer) and its discounting of the findings of international investigations (in particular the two EC reports). This is the sort of evidence that NZ Steel might have put forward to MBIE before its investigation was completed. Although the time frame may have been tight, it might have put at least some of Mr Gospage’s expert comments forward in response to the Essential Facts and Conclusion Report. Or it might have put it forward following the Provisional Measures Report to bolster the submissions it made on that report which were to similar effect as Mr Gospage’s evidence.

[233]     Other than to consider what other secondary sources might have been available to MBIE, I have not taken into account the evidence of Professor Lardy and Mr Gospage. It is not appropriate to allow material which was not before the decision maker, largely brought into existence after the impugned decision was made, and to do so essentially for the purpose of casting doubt on the substantive unreasonableness of the decision. There is also the issue that Mr Gospage’s evidence is largely a discussion of the overseas decisions which the Court is able to review for itself. That discussion would have also needed to have met the “substantially helpful” test for admission of expert opinion evidence.

[8]The evidence of Dr Scholz was dealt with in the following way:

[250]     As MBIE submits, Dr Scholz’s evidence was not before MBIE when it gave its decision. NZ Steel could have put this evidence before MBIE during its investigation. Other parties would then have had an opportunity to comment on it. They might, for example, have been able to comment on the comparative costs of importing and cutting down wide steel versus the costs

of importing narrow steel. They might also have been able to challenge the degree of substitutability by empirical data about the extent to which this occurs.

[251]     A judicial review must focus on the information that was before the decision maker. This affidavit does not meet the test for admission because: it could have been obtained and put before MBIE with reasonable diligence; it does not go to whether MBIE’s advice was wrong about the existence of subsidies; and MBIE has not had the opportunity to test the information as part of its investigation.

[252]     That said, Dr Scholz’s evidence will be relevant if there is a reinvestigation or a further investigation. On its face that evidence provides a strong challenge to the views reached by MBIE. Those views were based on assumptions about the extent of substitutability and connectivity which do not appear to have taken into account the kind of matters Dr Scholz has referred to. The determination of the relevant subject goods may need reconsideration in light of this evidence and any other evidence obtained in that further investigation.

[9]    These views about the expert fees do not preclude their recovery. The question is whether they were reasonably necessary for the conduct of the proceeding, not whether I relied on them in forming my views. Clearly irrelevant expert evidence is not reasonably necessary.4 However, if it is reasonable to engage an expert for the conduct of the proceeding, the expert fee is recoverable even though ultimately it may not have assisted the Court.5

[10]   In this case a key submission for NZ Steel was whether, in light of the limited and unverified information MBIE had obtained from the Chinese Government and the Chinese producers of galvanised steel, MBIE was required to do more by way of investigation in order to properly inform the Minister of the relevant considerations. The evidence of Professor Lardy and Mr Gospage were directly relevant to this submission. It was NZ Steel’s view that it was incumbent on the Minister, through MBIE, to source other relevant and reliable information from secondary sources because of the non-cooperation from the primary sources.

[11]   I accepted that there were a range of ways MBIE might have investigated the matter in light of the limited cooperation from the Chinese Government and the Chinese producers.  I accepted Professor Lardy and Mr Gospage’s evidence was the

4      See, for example, Haricot Investments Ltd v Maerewhenua District Water Resource Company Ltd

[2015] NZHC 518 at [48]-[49].

5      Air New Zealand Ltd v Commerce Commission (2005) 17 PRNZ 786 at [74]-[76].

kind of information potentially available to the Minister. In this sense their evidence was relevant.

[12]   I also accepted the Minister was not properly informed about the relevance of overseas investigations as a legitimate source of reliable information. The reports of those investigations are detailed and lengthy. Presenting them in a way that makes them digestible to someone not familiar with them is not straight forward. The applicant spent a substantial part of the hearing discussing them. I have no doubt that Mr Gospage’s expertise on overseas investigations assisted the applicant in this.6 Even then, I asked the parties to prepare a summary of each of the decisions, which they did. Although that provided a helpful introduction to them, I then personally spent many hours after this reviewing the decisions in order to get a clear understanding of them. In these circumstances I accept that it was reasonably necessary for the conduct of the proceedings for NZ Steel to engage Mr Gospage.

[13]   Similarly, Dr Scholz’s evidence was directly relevant to NZ Steel’s submission that MBIE erred in limiting the description of the goods to a width of 1260 mm.     Dr Scholz’s evidence provided a strong challenge to MBIE’s views on this issue. I considered that the relevant subject goods might need reconsideration in light of this evidence. NZ Steel should have put this evidence before MBIE during the investigation if it wanted to ensure the points Dr Scholz made were before the Minister. Nevertheless, I accept it was reasonably necessary for the conduct of the proceedings to assist in explaining NZ Steel’s view as to the flaws in MBIE’s consideration of the scope of the subject goods.

[14]   I therefore accept that it was reasonably necessary for NZ Steel to engage all three experts for the conduct of the proceeding.  Having said that, to some degree  Mr Gospage’s affidavit evidence was directed to criticising MBIE’s conclusions. For example, it includes the following:

In the absence of cooperation from the GOC and the exporters, the weight of evidence in my view points clearly to a conclusion that SOEs supplying HRS and CRS are public bodies. MBIE’s negative conclusion is based largely on the premise that public bodies must have the ability to control third parties,

6      Air New Zealand Ltd v Commerce Commission [2007] NZCA 27, [2007] 2 NZLR 494 at [62].

which, as discussed above, is no longer valid. The correct view, in my opinion…

[15]   Similarly, Professor Lardy’s affidavit addressed two topics: (1) the role of subsidies in the Chinese economy; and (2) comments on related findings in MBIE’s Final Report. The second of these directly challenges MBIE’s findings.

[16]   This kind of evidence is not relevant in a judicial review. For that reason I did not consider it. Because, to some extent, the evidence went beyond its proper scope in my view it is not appropriate to allow full recovery for it. However, recognising that the evidence likely assisted counsel for NZ Steel to frame its submissions, the reduction in recovery should be modest. That is because the incremental work in formally preparing the evidence, over and above providing assistance to NZ Steel, is not likely to have been great.

[17]   Taking a pragmatic and broad-brush approach, I consider the recovery of Professor Lardy and Mr Gospage’s fees should be reduced by 25 per cent. This is because roughly half of their expert evidence went beyond its proper scope. Of that half, I allow half of that (25 per cent) to be recovered to recognise it was still of assistance to NZ Steel and reasonably necessary to that extent. On this basis 75 per cent of the fees were reasonably necessary.

Reasonable in amount

[18]   The respondent submits NZ Steel has not discharged its onus on the balance of probabilities that the expert fees were reasonable in amount. The respondent says NZ Steel provided only limited information and did not follow the approach suggested in Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd which, amongst other things, suggested a supporting affidavit from an independent expert practising in the same field may be necessary.7 The respondent says Mr Gospage’s hourly rate of £200 has not been explained or justified and the narration on the invoices for Mr Gospage and Professor Lardy is inadequate.

7      Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd [2015] NZHC 470 at [44].

[19]   An affidavit from an independent expert to support the claimed disbursements as reasonable in amount was a suggested approach when the quantum claimed was significant. It was made in the context of a claim for over $800,000 for expert witnesses’ costs, where there were a wide range of experts (planners, environmental scientists, engineers, soil scientists or hydrogeologists), and the judge did not have the benefit of hearing from them because the issue of quantum was settled early in the course of the trial.8 Even then, the Judge, in the absence of such an affidavit, proceeded to assess the reasonableness of the amount taking a pragmatic approach.9

[20]   The present context is different. The total expert fees claimed is considerably less, the nature of the evidence is in, or is analogous to, fields that are not infrequently before this court and I am fully apprised of the nature of their evidence.10

[21]In this case NZ Steel has provided the following invoices:

(a)Invoice No 0145 (dated 19 March 2018): £37,600 for preparation of an expert report in relation to the proceedings by Mr Gospage assisted by Cliff Stevenson for 188 hours of work undertaken at £200 per hour.

(b)Invoice No 0146 (dated 6 April 2018): £3,704 for preparation of an expert report in relation to the proceeding by Mr Gospage assisted by Cliff Stevenson for 18.25 hours of work undertaken at £200 per hour together with £54 for the cost of a notary in Brussels.

(c)Invoice No 0157 (dated 8 May 2018): £1,000 for preparation of an expert report in relation to the proceeding by Mr Gospage assisted by Cliff Stevenson for five hours of work undertaken at £200 per hour

(d)Invoice from Professor Lardy (dated 13 March 2018): US$24,500, comprised of US$22,000 for “[a]nalytical Report on the role of subsidies in the Chinese economy” and US$2,500 for “[c]omments on MBIE Final Report on Galvanised Steel from China”.

8      At [30], [43] and [49].

9 At [53].

10     See, for example, Kim v Minister of Justice [2016] NZHC 3086 where an expert fee from an expert on the Chinese criminal justice system was allowed as a disbursement.

(e)Invoice from Dr Scholz (dated 15 April 2018): $1,581.25 for “[c]onsulting hours of Dr Wolfgang Scholz” for 5.5 hours of work at

$250 per hour.

[22]   I have no basis for concluding that these amounts are unreasonable for the work involved. Mr Gospage is not a solicitor, but he has considerable experience in the European Commission and WTO decisions in this area. The combined hourly rate for Mr Gospage and his assistant appears to be reasonable by comparison with the usual hourly rates of experienced commercial lawyers in this country. The hours involved seems high, but the decisions he discusses are detailed and lengthy and I have no basis for saying that the time involved was unreasonable.11 Professor Lardy’s fee does not appear to be out of line with fees charged by other experts in important litigation before the Court. He has considerable expertise in the Chinese economy through the academic positions he has held and his research and writing in the area. Dr Scholz’s hourly rate and the hours involved again seems to be entirely reasonable and are not directly challenged by the respondent.

[23] The respondent says the disbursements claimed are disproportionate in the circumstances of the proceeding. I do not agree. This was important and complex litigation as the costs category 3B reflects. No further reduction is appropriate beyond the one I have discussed at [17] above. Moreover, that reduction arguably is too great for Professor Lardy’s affidavit evidence given his own breakdown of the time he spent on each of the two matters he covered. In this respect, the respondent has been given the benefit of the broad-brush approach I have taken recognising that NZ Steel bears the onus.

Result

[24]   The respondent is to pay the applicant the sum of $90,136.03 for expert fees in addition to the costs and other disbursements that have been agreed.

Mallon J

11     Air New Zealand Ltd v Commerce Commission, above n 5 at [76].