Shanghai Neuhof Trade Co Ltd v Zespri International Ltd

[2019] NZHC 3479

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2014-404-001316

[2019] NZHC 3479

BETWEEN

SHANGHAI NEUHOF TRADE COMPANY LIMITED

First Plaintiff/First Counterclaim Defendant

SHANGHAI HUI ZHAN LOGISTIC LIMITED

Second Plaintiff/Second Counterclaim Defendant

AND

ZESPRI INTERNATIONAL LIMITED

Defendant/Counterclaim Plaintiff

Hearing:	16 December 2019
Appearances:	B Gray QC and K Muller for Plaintiffs/Counterclaim Defendants M Corlett QC, S Barker and L Sizer for Defendant/Counterclaim Plaintiff
Judgment:	20 December 2019

JUDGMENT OF WYLIE J

This judgment was delivered by Justice Wylie On 20 December 2019 at 2.00 pm

Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar

Date:…………………………

Solicitors/counsel:

Winston Wang & Associates/B D Gray QC/K Muller, Auckland Buddle Findlay, Wellington/M Corlett QC, Auckland

SHANGHAI NEUHOF TRADE CO LTD v ZESPRI INTERNATIONAL LTD [2019] NZHC 3479 [20

December 2019]

Introduction

[1]                  I refer to my judgment dated 27 May 2019.1 I then adjourned the hearing of this proceeding from 1 July 2019 until 27 April 2020. It is scheduled for a six-week hearing due to commence on that date.

[2]                  The plaintiffs and counterclaim defendants – Shanghai Neuhof Trade Company Limited and Shanghai Hui Zhan Logistic Limited (jointly the plaintiffs) have now requested a further adjournment. The application is resisted by the defendant/counterclaim plaintiff – Zespri International Limited (Zespri).

[3]                  The application formally seeks to adjourn the hearing until a date after 26 February 2021, but Mr Gray QC, appearing for the plaintiffs, advises that he already has trial commitments beginning in May 2021 for five months, and in February 2022 for eight weeks. The earliest he could be available for a rescheduled six-week trial would not be until mid-2022. It would of course be open to the plaintiffs to appoint replacement counsel. I have proceeded on the assumption that that will occur and deal with the application in its terms – an adjournment until a date after 26 February 2021.

Background

[4]                  The further application for adjournment is made because a significant witness for the plaintiffs, Xiong Jie Liu (Mr Liu) is in prison in China.

[5]                  As I noted in my earlier judgment,2 Mr Liu is serving a sentence of imprisonment, imposed on him in 2012 by the Shanghai No 1 Intermediate Peoples’ Court, for smuggling general cargo. The offending involved the underpayment to Chinese Customs authorities of duty on kiwifruit exported into China by Zespri. The sentence was upheld on appeal – first by the Shanghai High Peoples’ Court and then by China’s Supreme Court.

1      Shanghai Neuhof Trade Co Ltd v Zespri International Ltd [2019] NZHC 1176.

2 At [3].

[6]                  The sentence was initially for a term of 13 years expiring on 26 November 2024. A deponent on behalf of the plaintiffs – Mr Xu – has deposed that the sentence has since been commuted on three separate occasions:

(a)on or about March 2015 for a period of two years;

(b)on 22 March 2016 for a period of one year; and

(c)on 22 January 2018 for a period of nine months.

[7]                  I was initially told that Mr Liu had submitted an application for parole in January 2019. In my earlier judgment I recorded evidence which was then before the Court that it was likely that Mr Liu’s application for parole would be granted. There now appears to be no certainty as to that. Mr Xu has deposed that each prison has its own parole rules, and that the ability to apply for parole largely depends upon a prisoner’s good behaviour as adjudged by prison officials. The specific parole rules of any particular prison are apparently not publicised. Mr Xu deposes that the procedure for parole is initiated by the prison, which submits its parole recommendations to the Peoples’ Court based on the results of the prison’s own internal assessment.

[8]                  Mr Liu is currently imprisoned in Milan Prison in Xinjiang, in north west China.

[9]                  It appears from Mr Xu’s affidavit that the President of China – President Xi – has recently announced a crackdown on corruption. It is Mr Xu’s evidence however that the provisions of the Supreme Peoples’ Court on the Procedures for hearing Commutation and Parole cases, effective as from 1 June 2014, require the appointment of a panel if an error is found in a legally effective commutation or parole order. The panel proceeds either to a retrial or to render a final order. Mr Xu deposes that this process, if initiated, would be separate from President Xi’s crackdown on corruption.

[10]              Based on the materials now before me, it cannot be said with any confidence that Mr Liu will be released on parole. All that can be said is that Mr Liu’s sentence

has been commuted (although Zespri notes that there is limited documentary material to support even this assertion). Assuming that the sentence has been commuted and that the commutations are not reopened, the earliest that Mr Liu will be released is 26 February 2021. That is no doubt why the application seeks the hearing be postponed until sometime after that date.

Submissions

[11]              Mr Gray QC, for the plaintiffs, submitted that Milan Prison is in the north west of China, in a remote area. He accepted that that Zespri (and the Court) are concerned to obtain as much information as possible about Mr Liu’s terms of incarceration, but noted that he is not in prison in New Zealand. He argued that the plaintiffs have put before the Court and Zespri as much information as is available. He submitted that it is difficult if not impossible for the plaintiffs to brief Mr Liu’s evidence, and that it is now clear that Mr Liu cannot attend the trial in April 2020, whether in person or by AVL. He argued that the interests of justice favour the grant of a further adjournment. He accepted that there is a prejudicial effect of further delay, but argued that this is a case where there are some contemporaneous records, albeit that oral evidence will be required. He acknowledged that witnesses’ memories will have dimmed with time, but put it to me that Zespri has already had the opportunity to brief its witnesses. When I questioned him about this issue, he did however accept that Zespri may have to brief further witnesses, once it knows what Mr Liu proposes to say. He nevertheless submitted that it is not uncommon for the Courts to deal with matters which occurred some years ago and that it is not an impossible task. He said that if a further adjournment is denied, there will in effect be a strike out, because the plaintiffs cannot proceed without Mr  Liu’s  evidence.   He argued that, according to the plaintiffs,   Mr Liu was imprisoned for actions the plaintiffs attribute to Zespri, and that it would be wrong to allow Zespri to derive a benefit from its own wrongdoing.

[12]              Mr Corlett QC, for Zespri, argued that, in terms of my earlier judgment, the onus was on the plaintiffs to make out “a very good reason” for a further adjournment. He argued that the plaintiffs have not made out any good reason, let alone a very good reason, to justify yet a further indulgence from the Court. He submitted that the plaintiffs’ case for a further adjournment is weaker than it was at the time of the first

adjournment application. By way of example, he noted that on 14 March 2019, the plaintiffs filed a memorandum advising that Mr Liu’s release from prison was imminent. He pointed out that the plaintiffs are now unable to say when Mr Liu will be released from prison. He further noted that the plaintiffs initially sought an adjournment of the hearing until the second half of 2020, but that I declined an adjournment of that length in my earlier judgment, and then only by a fine margin. He put it to me the present application seeks a trial date that I rejected when I determined the first application. He also argued that the plaintiffs have failed to take any steps to address Mr Liu’s unavailability, notwithstanding that they knew of his unavailability when the proceedings were filed in 2014. He noted that, notwithstanding the reservations I expressed in my earlier judgment about the plaintiffs’ failure over five years to try and resolve the issue of Mr Liu’s unavailability, the plaintiffs have still not taken any real steps in that regard. He even suggested that there is nothing to suggest that Mr Liu is prepared to give evidence, or if he will give evidence consistent with the plaintiffs’ claim. He argued that this was inexcusable, and that it is a powerful, if not conclusive, reason for declining the application. Finally, Mr Corlett submitted that any further adjournment would be significantly more prejudicial to Zespri than to the plaintiffs. He noted that Zespri has been put to considerable cost in defending the proceedings over the last five and a half years, and that it has suffered reputational harm as a result of the proceedings. He said that Zespri deserves finality. It argued that any prejudice for the plaintiffs arising from Mr Liu’s unavailability was known and foreseeable when they filed the claim in 2014, and that the plaintiffs should not be entitled to obtain repeat adjournments at Zespri’s expense.

Analysis

[13]              As noted in my earlier judgment, the application is governed by r 10.2 of the High Court Rules. It provides as follows:

10.2 Adjournment of trial

The court may, before or at the trial, if it is in the interests of justice, postpone or adjourn the trial for any time, to any place, and upon any terms it thinks just.

[14]              The rule confers a wide discretion on the Court.3 The essential question which the Court must ask itself is whether or not an adjournment is necessary in order to do justice between the parties. It is necessary to consider the interests not only of the party seeking the adjournment, but also the interests of the party who wishes to retain the benefit of the fixture. A balancing exercise is called for.4

[15]              Relevant considerations bearing on the exercise of the discretion can include the following:

(a)when the unavailability of a witness forms the basis of the application, the reasons for the unavailability and the impact of the unavailability in proceeding to trial;

(b)whether the applicant has acted reasonably and done everything practicable to avoid the need for an adjournment;5

(c)the right of the parties to a fair trial and the need for resolution of the proceedings, including the likely impact of further delay on the quality of the evidence, the difficulties of reorganising witnesses for a later trial date, and the like;6

(d)the prejudice likely to be caused to each party as a result of the exercise of the discretion the one way or the other;7 and

(e)the public interest in the efficient administration of justice.8

[16]              I accept that Mr Liu is a critical witness from the plaintiffs’ perspective. As I recorded in my earlier judgment, the plaintiffs’ claims are founded in part on an alleged oral contract entered into in 2006 between Mr Liu, on behalf of Shanghai Neuhof, and

3      Cygnet Farms Ltd v ANZ Bank New Zealand Ltd [2016] NZHC 1945.

4      O’Malley v Southern Lakes Helicopters Ltd HC Christchurch CP513/89, 4 December 1990 at 1- 2.

5      High Court Rules 2016, r 10.2.02(2).

6      Chilcott v McLachlan HC Auckland CIV-2007-404-2796, 5 June 2009.

7      A C Beck and others McGechan on Procedure (online ed, Thomson Reuters) at 10.2.02(2).

8      EBR Holdings (in liq) v Van Duyn [2016] NZHC 1169.

Hu Jan Chen, on behalf of Zespri. As I understand it, Mr Liu is the only person who can give evidence of the alleged oral contract from the plaintiffs’ perspective.

[17]              Nevertheless, I agree with Zespri that the plaintiffs knew at the time they filed their statement of claim that Mr Liu’s evidence was critical for them. They knew that Mr Liu was serving a prison sentence at the time. Further, Zespri expressly pointed out the difficulties that arise from Mr Liu’s potential unavailability as early as August 2014.

[18]              Notwithstanding criticisms made by me of the plaintiffs’ approach to the issue of Mr Liu’s unavailability in my earlier judgment, the plaintiffs have taken matters no further. Mr Xu, in his affidavit, records that under relevant provisions in China, lawyers can meet with prisoners. Lawyers are required to submit relevant documents to the prison authorities, and if the documents meet specified requirements, the prison will arrange a meeting as soon as possible, and no later than 48 hours. While generally speaking, this applies to cases in China, Mr Xu does not suggest that this process is unavailable in respect of proceedings in New Zealand. Rather, he states that the prison would have no obligation to assist Mr Liu in giving evidence, and that there can be no certainty that the prison would give assistance. The plaintiffs have not tested the issue. Mr Xu also deposes that prisoners can testify in one of two ways in Chinese cases – either through a signed statement, or through a “live video”. Mr Xu deposes that he does not know if Milan Prison has equipment for live video. Nor does he know whether or not Milan Prison has any restrictions on video testimony. He postulates that it is likely to be more difficult to get assistance from the prison authorities for a case being heard in New Zealand, but again, the position has not been tested by the plaintiffs.

[19]              I also agree with Zespri that these proceedings need to be resolved. The statement of claim was filed as long ago as May 2014. There is a strong public interest in the expeditious resolution of disputes. This matter has already suffered from considerable delay. Zespri cannot be expected to wait indefinitely, and until a date either some time in 2021 or worse, 2022. I accept Zespri’s argument that the matter is becoming stale. Witnesses, even now, will be required to recall events that are said to

have occurred very many years ago. There is a very real risk that memories will have faded. That risk increases as the years pass.

[20]              I accept that there is prejudice to the plaintiffs if they are required to proceed to trial. The evidence of their key witness will likely not be available. However, in my judgment, that prejudice is at least in part of the plaintiffs’ own making. There is nothing before me to persuade me that the plaintiffs have made any reasonable attempt to brief Mr Liu, or to ascertain whether or not he can give evidence from Milan Prison.

[21]              I have considered Mr Gray’s submission that, in the plaintiffs’ view, Mr Liu is in prison for acts for which Zespri was responsible. I do not know if there is anything in this argument. It is denied by Zespri and I do note that Mr Liu apparently now accepts his guilt. I do not give that argument much weight. I only have submissions from counsel and I cannot determine the issue the one way or the other. I repeat – the plaintiffs have already obtained one adjournment. They have not progressed matters since that adjournment was granted. They cannot expect the Court and Zespri to wait at their convenience.

[22]              I also accept that there is prejudice to Zespri. It has already incurred significant costs. It is ready to go to trial. It has had these proceedings hanging over its head like a sword of Damocles for some considerable time. There has been media publicity about the matter, and I accept that there will have been reputational harm to Zespri. In my judgment, the prejudice to Zespri outweighs the prejudice to the plaintiffs. It is entitled to expect that the plaintiffs will move with reasonable expedition to bring their claim to a conclusion. It is entitled to finality.

[23]              I note Mr Gray’s argument that an order declining an adjournment will in effect be a strike out. I reject that argument. The Court is ready to hear the case. There is  no strike out. There may be a discontinuance – that is a matter for the plaintiffs.

[24]              Repeat adjournments, particularly of long case matters, are unfair to other deserving litigants, who are seeking to bring their cases on for hearing. Litigants cannot expect to tie up considerable amounts of Court time and then seek to adjourn

the trial. Obtaining a lengthy fixture in this Court is already difficult and this fact causes understandable frustration for litigants.

[25]              The application for an adjournment is declined. I direct the Registrar to convene a telephone conference, in the week of 3 February 2020, to ensure that the matter is ready for trial, to commence at 10.00 am on 27 April 2020.

[26]              For the sake of completeness, I record advice given to me by Mr Corlett. He has advised me that if the adjournment application is declined, and as a result, the plaintiffs discontinue their claim, Zespri will not continue with its counterclaim. He recorded that Zespri was not in any sense suggesting that its counterclaim did not have merit, and that its agreement to discontinue the counterclaim is simply a recognition of the difficulties of enforcing any judgment in China.

[27]              Counsel agreed that costs should be fixed on a 2B basis. I anticipate that they will be able to reach agreement on quantum. I make an order in Zespri’s favour and against the plaintiffs. If there is any difficulty in fixing costs, then the same is to be referred to me within 20 working days of the date of this judgment.

Wylie J