Shanghai Neuhof Trade Company Limited v Zespri International Limited

[2019] NZHC 1507

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2014-404-001316

[2019] NZHC 1507

BETWEEN

SHANGHAI NEUHOF TRADE COMPANY LIMITED
First Plaintiff/First Respondent

SHANGHAI HUI ZHAN LOGISTIC LIMITED

Second Plaintiff/Second Respondent

AND

ZESPRI INTERNATIONAL LIMITED

Defendant/Applicant

Hearing:	On the papers
Judgment:	28 June 2019

JUDGMENT OF WYLIE J [COSTS]

This judgment was delivered by Justice Wylie On 28 June 2019 at 4.30 pm

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

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 1507 [28 June 2019]

Introduction

[1]    I refer to my judgment of 27 May 2019. I granted an adjournment on the plaintiffs’ application, but recorded that it was nevertheless appropriate to order costs against the plaintiffs, given that they had been granted an indulgence.

[2]I have now received memoranda in relation to costs.

Zespri’s position

[3]    Zespri seeks costs incurred in opposing the application on a 3C basis and in the total sum of $17,325. It also seeks wasted costs for trial preparation, on an increased basis, in the total sum of $88,724.57, and disbursements of $116,015.28. It argues that 3C scale costs are appropriate because “a comparatively large amount of time” was required to prepare the opposition to the adjournment application. It says that the Court has jurisdiction to award wasted costs, and it seeks an increase in that regard, due to conduct it attributes to the plaintiffs. It seeks an uplift of 50 per cent of actual costs in respect of “wholly wasted” legal costs, and 25 per cent of actual costs in respect of “partially wasted” legal costs. It also seeks reimbursement for 100 per cent of “wholly wasted” disbursements, and 50 per cent of “partially wasted” disbursements.

The plaintiffs’ position

[4]    The plaintiffs accept that they are liable to pay costs on the application for an adjournment. They submit that the appropriate band is 2B. The plaintiffs also accept that they are liable to pay wasted costs, but they argue that the sums claimed by Zespri are excessive, either because the steps taken will not be wasted, or because the amount claimed is excessive, or both.

Analysis

Background

[5]It is helpful to briefly set out the background to the adjournment application.

[6]    On 13 December 2012, the plaintiffs’ principle witness – Mr Liu – was convicted and sentenced to 13 years’ imprisonment in China.

[7]    The plaintiffs nevertheless commenced the proceedings in May 2014. Shortly thereafter, in June 2014, the defendant wrote to the plaintiffs on a without prejudice save as to costs basis, noting that Mr Liu was unavailable as a witness, and suggesting that that was an unsurmountable hurdle for the plaintiffs. The defendant then filed an application seeking to strike out the proceedings, asserting inter alia that Mr Liu was unavailable. The plaintiffs resisted that application. They accepted that Mr Liu was in prison, but asserted that that did not mean that he would be unavailable to give evidence. Courtney J declined to strike out the proceedings, accepting that Mr Liu’s unavailability was a matter which could be dealt with through case management.

[8]    A large number of interlocutory applications followed. The plaintiffs throughout were seeking a trial date. Zespri was resisting these requests because it considered that the plaintiffs’ discovery was inadequate.

[9]    On 19 June 2018, the proceeding was set down for a six-week hearing, commencing on 1 July 2019, at the plaintiffs’ request.

[10]   On 30 January 2019, the plaintiffs filed a memorandum proposing a pre-trial timetable. They advised the Court that they then anticipated that Mr Liu had applied for parole and was about to be released from prison. They said that immediately after he was released, they would take steps to brief him in China. Following a chambers hearing, I made pre-trial directions relying on the plaintiffs’ assurances.

[11]   On 14 March 2019, the plaintiffs filed a memorandum advising that Mr Liu was still incarcerated, and that as a result, they were unable to provide their briefs. Nevertheless, the plaintiffs advised their then understanding that Mr Liu was about to be released from prison, and asserted that they were anxious to proceed with the trial in July.

[12]   Shortly thereafter, the plaintiffs requested an adjournment. The adjournment application was accompanied by two affidavits. The affidavits confirmed that Mr Liu

had made an application for parole in or about January 2019, but that nevertheless he had not been released. The adjournment application was opposed by Zespri. After hearing from the parties, I granted the adjournment.

Costs in relation to adjournment application

[13]   The Court has jurisdiction to award costs against a party granted an adjournment. Such applications are interlocutory applications, and the Rules require that generally costs be addressed following the determination of any particular application.

[14]   The defendant claims costs for filing an opposition to the interlocutory application for an adjournment, the preparation of submissions and its appearance at the hearing (but only for one counsel). These heads of claim are not disputed by the plaintiffs. Rather, the argument turns on the appropriate scale.

[15]   In the first case management conference in relation to this matter, Associate Judge Christiansen noted that counsel had agreed that the proceedings should be categorised on a 2B basis, but that some steps might warrant a higher cost categorisation. Courtney J, when the strike out was before her, concluded that costs on that application should be fixed on a 2B basis. More recently, when I was considering an application for increased security brought by the defendant, I was presented with a calculation by the defendant of its likely costs if the matter proceeded to trial. That calculation was undertaken on a mixed 3B and 3C basis. I accepted that calculation for the purposes of determining the security for costs application.

[16]   I cannot see that 3C costs are appropriate in regard to the present application. It was a relatively straightforward application for an adjournment. The law is well settled, and what was at issue was the application of the law to the facts. Mr Corlett QC, appearing for the defendant, presented comprehensive submissions with considerable care and skill, but that of itself does not mean that the application falls to be determined as a category 3 proceeding. It was not of undue complexity, such as to require counsel with special skill and experience. In my judgment, the appropriate categorisation is 2B.

[17]   I do however consider that it is appropriate to uplift costs calculated on a 2B basis under r 14.6(3)(d). The plaintiffs have known for some time that Mr Liu was incarcerated in China. They knew that they needed Mr Liu as a witness. They nevertheless requested the hearing date and a timetable was put in place to accommodate that hearing date. They then had to apply for an adjournment. Further, and as noted in my substantive decision, there was no evidence put before me to show that the plaintiffs had done everything practicable to avoid the need for an adjournment.

[18]   I have considered the approach suggested in Holdfast NZ Ltd v Selleys Pty Ltd.1 For the reasons I have set out, I consider that the application is appropriately categorised on a 2B basis. I also consider that the time allowances fixed by r 14.5 are reasonable for the steps taken in the proceedings, and I note that there has been no application for extra time by the defendant. Nevertheless, standing back and looking at the application for an adjournment in the round, and given the matters I have briefly set out above, it is my view that 2B costs should be uplifted by 50 per cent, to take into account the plaintiffs’ conduct.

Wasted costs

[19]I now turn to the issue of wasted costs.

[20]   The Court has jurisdiction to award wasted costs when a fixture is vacated.2 Vacating a fixture can lead to inconvenience and costs, not only to the other party to the fixture, but also to other parties awaiting fixtures in this Court. It has been recognised that the Court can apply a costs sanction to parties who, through their own default, cause fixtures to be vacated.

[21]   The defendant seeks wasted costs in respect of attending to pre-trial timetable matters. It claims $3,000 in this regard. Despite the plaintiffs’ submissions to the contrary, I consider that those costs were wholly wasted. A new timetable will be necessary as a result of the adjournment. I allow this claim.

1      Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA).

2      Fu Hao Construction Ltd v Lang Co Albany Ltd HC Auckland CIV-2004-404-6608, 23 May 2008;

Jeffreys v Morgenstern [2013] NZHC 1361.

[22]   Zespri also claims costs in regard to drafting, filing and serving a subpoena on a witness, Jenny Chin. It claims in this regard $622.50. The plaintiffs assert that these costs are only partially wasted because Zespri will have a draft of the subpoena and will be able to be used again if it becomes necessary to subpoena Ms Chin again. This in my view is speculation. Again, I accept that the costs claimed were wholly wasted, and I allow them.

[23]   The rest of the wasted costs claimed relate to “trial preparation”. It is said that these costs were “partially wasted”. Invoice dates are given but I have not been given copies of the invoices to see what work was undertaken. Nor do I have any affidavits setting out the work undertaken or why time spent in preparation has been partially wasted. Nor is there any analysis in the defendant’s submissions as to how the preparation undertaken has been partially wasted.

[24]   It is only those costs which were incurred directly as a result of the 1 July 2019 fixture and which are likely to be wasted or unable to be recovered when the matter proceeds to a hearing, which can be recovered by way of a costs order on an adjournment application. Zespri’s submissions proceed on the assumption that the costs incurred in trial preparation are necessarily wasted – at least in part. I do not accept that this will be the case. There is nothing to show that there was a link between the costs said to be partially wasted and the adjournment. If, for example, briefs were completed and filed, or drafts of briefs were prepared, then that material will be able to be used when the matter proceeds to trial. Some refreshment is likely to be necessary, but there is nothing before me to indicate what work has been done to date, or what work will need to be redone because of the adjournment. Where a Court is required to consider wasted costs, it will necessarily have to do so as a matter of impression and best judgment at the time, but some evidential foundation for an award is required. In the absence of any evidential foundation, I decline to allow the wasted costs claimed.

[25]   The wasted disbursements claimed relate to invoices received from various experts retained by the defendant. Much the same comments apply. While it is asserted that work done has been “partially wasted”, I have not been provided with the invoices and no detail is given by the defendant in its submissions. Again, I do not

know how much work undertaken will need to be redone. There are, for example, no affidavits or letters from the experts confirming the likely additional work that will be required by them.3 I decline the application for wasted disbursements.

[26]   I anticipate that counsel will be able to finalise the costs awarded. If there is any dispute, it is to be referred to the Registrar.

Wylie J

3      Cf. Jeffreys v Morgenstern, above n 2 at [38]-[39].