Service Foods Limited v Wang

[2024] NZHC 2038

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2023-419-289

[2024] NZHC 2038

IN THE MATTER

of the tort of conversion, dishonest assistance and unjust enrichment

BETWEEN

SERVICE FOODS LIMITED

Plaintiff

AND

QING WANG

First Defendant

G&C TRADING LIMITED
Second Defendant

GIANT ME LIMITED

Third Defendant

LITTLE ME LIMITED

Fourth Defendant

Hearing:

On the papers

Counsel:

S Langston for Plaintiff

E Anderson for First and Second Defendants

Judgment:

25 July 2024

JUDGMENT OF GORDON J

[As to costs]

This judgment was delivered by me on 25 July 2024 at 3 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors:

Shieff Angland, Auckland

Braun Bond & Lomas, Hamilton

SERVICE FOODS LTD v WANG [2024] NZHC 2038 [25 July 2024]

[1]                   On 31 May 2024, I made an order continuing freezing orders as varied against the first and second defendants, Qing Wang and G&C Trading Ltd (G&C Trading) respectively, until further order of this Court (the judgment).1

[2]                  I reserved costs and observed that, as the successful party, Service Foods Ltd (Service Foods) was prima facie entitled to costs. I directed that the parties were to file a joint memorandum if costs were agreed. The parties were to file and serve separate costs memoranda in the event they could not agree.2

[3]                  The parties have agreed that costs are payable to Service Foods on a 2B basis. However, the parties have been unable to agree on some of the steps and disbursements claimed by Service Foods.

[4]                  Service Foods seeks costs and disbursements of $23,452.813 as set out in a schedule attached to the submissions of counsel for Service Foods. A copy of that schedule is attached to this judgment as Appendix A.  Ms Anderson, on behalf of  Ms Wang and G&C Trading, submits that the costs should be reduced by $7,974.74.

Background

[5]                  In summary, Service Foods claimed that Mrs Wang’s husband misappropriated stock from his employer (Service Foods) and used G&C Trading (of which Mrs Wang is the sole director and shareholder) to channel the profits of his misappropriation. Service Foods alleges that the third and fourth defendants received the misappropriated stock and turned a blind eye to the misconduct.

[6]                  On 2 November 2023 Service Foods brought High Court proceedings against the defendants.4 On 6 November 2023, freezing orders were made by consent against Mrs Wang and G&C Trading. These orders were varied by consent on 12 December 2023 then extended, again by consent, until 21 May 2024. Mrs Wang and

1      Service Foods v Wang [2024] NZHC 1396 at [66].

2      At [67]–[68].

3      The total claimed by the plaintiff is $19,628.81, being the total at the end of the attached schedule. However, there is an error in the total. When the individual items are added up the total comes to

$23,452.81 (not $19,628.81).

4      There were originally six defendants, however, Service Foods has since discontinued proceedings against the fifth and sixth defendant.

G&C Trading did not consent to any further extensions of the freezing order, which resulted in the judgment.

[7]                  Service Foods has commenced these High Court proceedings in parallel with proceedings in the Employment Court against Mrs Wang’s husband. The Employment Court granted a freezing order over the assets of Mrs Wang’s husband. It is understood that on 13 May 2024, following a hearing of application to discharge, the Employment Court continued the freezing order for another four months. This is relevant because Service Foods has halved the expenses claimed for the disbursements used to support both sets of proceedings.

Legal principles

[8]                  The award of costs and disbursements is governed by pt 14 of the High Court Rules 2016 (HCR). The Court has a broad discretion to award the costs of a proceeding.5 So far as possible the determination of costs should be predictable and expeditious.6

[9]                  The usual way of determining costs is by applying the appropriate daily recovery rate (set under the HCR) to the time taken for each step required by the proceeding.7 The time taken must be objectively reasonable and does not necessarily reflect the time actually spent.8

[10]In regard to disbursements, r 14.12 of the HCR relevantly 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—

5      High Court Rules 2016, r 14.1.

6      Rule 14.2(1)(g).

7      Rule 14.2(1)(c).

8      Rule 14.2(1)(e).

(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.

…

The disputed costs items

[11]I address each of the disputed items in turn.

Memorandum of counsel dated 2 November 2023

[12]              Ms Langston, counsel for Service Foods, contends that this document was submissions (despite being titled “memorandum”) and therefore is appropriately claimed under item 24 (preparation of written submissions).

[13]              Ms Anderson submits that this document was filed in support of Service Foods’ without notice application for an interim freezing order. The HCR require the applicant for such an order to file a memorandum with the application. The length of the document, being 10 pages, does not mean it is claimable as submissions.

[14]Rule 7.23 of the HCR relevantly provides as follows:

7.23     Application without notice

…

(3)An applicant who makes an application without notice must, if the application is of a kind that is likely to be contested if it were made on notice, file a memorandum with the application that sets out—

(a)the background to the proceeding (including the material facts that relate to the proceeding); and

(b)the grounds on which each order is sought; and

(c)an explanation of the grounds on which each order is sought without notice; and

(d)all information known to the applicant that is relevant to the application, including any known grounds of opposition or defence that any other party might rely on, or any facts that would support opposition to the application or defence of the proceeding by any other party.

[15]              Ms Anderson’s focus on the word “memorandum” leads to what I consider is an incorrect position as regards whether the item is claimable.

[16]              First, the “memorandum” required is clearly a separate document from the application itself.

[17]              Second, what is required by r 7.23 when read as a whole and what the Court expects on a without notice application is a memorandum of submissions. The content of the memorandum is in reality the kind of content required in submissions on any interlocutory application: introduction, factual background, the law, application of the facts to the law and as well, material disclosure, given the application is made without notice.

[18]              The “memorandum” is not the kind of document a party might file for, say, a mention in the duty judge list. The memorandum is required to address issues in a substantive way. The applicant is seeking a judgment from the Court, albeit a judgment that is usually given on the papers.

[19]I consider the claim under item 24 is properly made. It is allowed.

Memorandum of counsel on behalf of the plaintiff dated 9 February 2024 and the chambers list appearance on 12 February 2024

[20]              Ms Langston submits that the appearance was necessary because the defendants had not filed a notice of opposition to the freezing order application and would not agree for the freezing order to be extended for any length of time.

[21]              Ms Anderson submits that on 9 February 2024 the defendants, through their solicitors, proposed that the freezing orders be extended until 15 March 2024. This proposal was rejected by Service Foods. During the case management conference on 12 February 2024, Service Foods requested that the freezing orders be extended until further order of the Court, despite Associate Judge Sussock lacking the jurisdiction to make such orders. Associate Judge Sussock then made orders directing that the defendants file a notice of opposition and the matter to be called before the duty judge on 20 March 2024.

[22]              It is apparent from the minute of Associate Judge Sussock that the extension of the freezing orders was not the only matter addressed and in respect of which orders were made at the conference. I will accordingly allow the claim for both the preparation of the memorandum and the appearance on 12 February 2024.

Second counsel appearance for the hearing on 21 May 2024

[23]              Ms Langston submits this step is claimable because the matters were important and had a degree of complexity, which was reflected in the fact that both parties had second counsel in attendance.

[24]              Ms Anderson submits that the matter was not overly complex and did not address difficult areas of law. Further, both parties having second counsel in attendance is not necessarily appropriate justification for claiming costs on second counsel.

[25]              I accept Ms Anderson’s submission. The matter was an interlocutory application, it was not overly complex and simply required the application of the facts to settled legal principles. I disallow the claim for second counsel.

Memorandum of costs

[26]              Ms Anderson submits that the filing of separate costs memoranda could have been avoided. She says that the defendants anticipated that the disputed costs would have been able to be resolved by the parties and accordingly requested the plaintiff to provide reasoning in response to the defendants’ views on the various items it disputed. However, instead of providing reasoning for their disagreement through counsel correspondence, Service Foods proceeded to file a separate costs memorandum with the Court.

[27]              There is some substance in the criticism made by Ms Anderson, especially in the circumstances where I encouraged the parties to agree costs.9

[28]I disallow the claim for this item.

Disputed disbursements

Fee charged for witnessing affidavits

[29]              Ms Langston submits that the law firm Gibson Sheat charged a fee of $148.75 (this is half the actual amount due to Employment Court proceedings as explained in [7]) for witnessing Mr Balar’s  lengthy  affidavit.  In  addition,  a  lawyer  from  Stace Hammond travelled to the Hamilton branch of Service Foods twice to witness a total of five affidavits, claiming a fee of $395.93 (half the actual fee). She submits that this had to occur because of the witnesses’ schedule and the urgency of making an application for a freezing order.

[30]              Ms Anderson submits that the fees are excessive, especially as the witnessing of affidavits is a task that counsel commonly does free of charge for other firms and vice versa. As for the five affidavits, she notes that it is unclear why two trips were required and how such a large fee was incurred when the affidavits are very short. However, Ms Anderson concedes that a modest charge to cover mileage ($21.36 as claimed on the invoice) may be warranted to account for counsel’s travel to meet the deponents.

9      Service Foods Ltd v Wang, above n 1, at [67].

[31]              Simply because some law firms follow the historical practice of witnessing affidavits free of charge, does not mean that where a law firm does charge a fee for such a service, that a claim for that fee as a disbursement should be disallowed. I do not consider the fees claimed are unreasonable. The larger fee is explained because of the need of the lawyer to travel to the Service Foods Hamilton branch and that this needed to be done twice because of the witnesses’ schedules and the urgency of making the application for a freezing order.

[32]I propose to allow both fees as a disbursement.

Office expenses to witness affidavits

[33]              Ms Langston submits that Gibson Sheat has charged $8.70 office expenses without further detail. Stace Hammond has charged $70 “incidental costs” for phone charges, postage, and file storage. She submits that these are the  costs  which Service Foods have paid and is therefore properly claimable.

[34]              Ms Anderson disputes the charge of $70 as excessive given that most local lawyers would not charge for taking an affidavit. She accepts that certain costs — such as courier costs or significant printing — may be claimable as disbursements, but there is no evidence that either of these were actually incurred by Stace Hammond.

[35]              I do not propose to allow the office expenses. The fact that Service Foods has paid the invoices is not a sufficient basis to support a claim. There is no explanation for the $8.70 expenses. While there was an explanation for the $70 office expenses, it has not been demonstrated why such expenses needed to be incurred for the service of witnessing affidavits.

[36]              Accordingly, the fee of $148.75 claimed for Gibson Sheat for witnessing affidavits and the fee of $395.93 claimed for Stace Hammond for witnessing affidavits are reduced to $143.75 and $355.68 respectively.

Transcription of the employment investigation interview

[37]              Ms Langston submits that the transcription is lengthy and required for the affidavit, and it is not a service captured by the steps claimed in scale costs. Accordingly, it is claimable as a disbursement.

[38]              Ms Anderson submits that the transcription is an administrative cost and, if Service Foods is able to be compensated for it, that should be addressed following the determination of the substantive matter to which the employment investigation will be most relevant.

[39]              The transcription referred to was  the  transcription  of  an  interview  with  Ms Wang’s husband by staff members from Service Foods. The transcript of the interview was annexed to one of the affidavits filed by Service Foods. It was referred to in the submissions of counsel for Service Foods and in the judgment.10 The translation cost was necessarily incurred for this proceeding. I allow the claim.

Result

[40]              In summary, I have allowed the claim by Service Foods for all items except: the claim for second counsel; the claim for preparation of the costs memorandum; and the office expenses which form part of the invoices of each of the two law firms that witnessed affidavits relied on by the plaintiff in the proceeding.

[41]The amount claimed is accordingly reduced by $1,897.50.

[42]              I award costs and disbursements of $21,555.30 in favour of the plaintiff against the first and second defendants.

Gordon J

10     Service Foods Ltd v Wang, above n 1, at [33].

Appendix A

Scale costs calculation (2B – daily recovery rate $2,390)

Service Foods Ltd v Wang & Ors

Step            Description  Time allocation     Amount
22	Filing interlocutory application for freezing order dated 2 November 2023	0.6	$1,434
24	Preparing and filing memorandum on behalf of the plaintiff in support of plaintiffs without notice application for a freezing and ancillary order dated 2 November 2023	1.5	$3,585
11	Preparation and filing of memorandum on behalf of the plaintiff updating the court and seeking extension of freezing and ancillary orders dated 9 February 2024	0.4	$956
12	Chambers list appearance 12 February 2024	0.2	$478
29	Sealing order dated 13 February 2024	0.2	$478
11	Preparing and filing memorandum on behalf of the plaintiff for chambers list appearance on 11 March 2024	0.4	$956
12	Chambers list appearance 11 March 2024	0.2	$478
11	Preparation and filing of memorandum on behalf of the plaintiff for duty judge list appearance on 20 March 2024 dated 19 March 2024	0.4	$956
12	Appearance at hearing on 20 March 2024 before Judge Muir (renewing freezing order)	0.2	$478
29	Order for sealing dated 25 March 2024	0.2	$478
25	Preparation by applicant of bundle for hearing dated 7 May 2024	0.6	$1,434
24	Preparation of written submissions for hearing on 21 May 2024	1.5	$3,585
26	Appearance at hearing on 21 May 2024 before Gordon J	0.75	$1,792.5
27	Second counsel appearance on 21 May	0.375	$896.25
11	Memorandum of counsel for plaintiff with Employment Court update dated 22 May 2024	0.4	$956

29	Sealing order of the court dated 31 May 2024 (extending freezing order)	0.2	$478
29	Sealing order of the court dated 31 May 2024 (costs – step not yet taken)	0.2	$478
11	Memorandum of counsel for plaintiff on costs dated 5 July 2024	0.4	$956
Total costs	$17,028.75
Disbursements	Amount
Translation services for translating the affidavits of Mr Li and Mr Yang	$1,150
Fee charged for witnessing affidavits (Gibson Sheat)	$148.75*
Fee charged for witnessing affidavits (Stace Hammond)	$395.93*
Transcription services for transcribing interview video	$558.81*
Courier costs	$346.57*
Total disbursements	$2,600.06
Total costs and disbursements	$19,628.81

*      Total cost is halved when expense was also used to support proceedings in the Employment Court.