Wei v Chin Yun Holdings Limited
[2025] NZHC 220
•19 February 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-387
[2025] NZHC 220
BETWEEN KAI WEI
First Plaintiff
GUOLONG OU
Second PlaintiffAND
CHIN YUN HOLDINGS LIMITED
First Defendant
DAQIN HOLDING LIMITED
Second DefendantHEPING YANG
Third Defendant
YUQI YANG
Fourth DefendantYUHAN YANG
Fifth Defendant
Hearing: 11 February 2025 Appearances:
D Bigio KC and C Jiang for the Plaintiffs / Respondents R Stewart KC for the Defendants / Applicants
Judgment:
19 February 2025
JUDGMENT OF GORDON J
This judgment was delivered by me on Wednesday, 19 February 2024 at 4 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
WEI v CHIN YUN HOLDINGS LTD [2025] NZHC 220 [19 February 2025]
[1] This is a judgment on an application for security for costs1 by the defendants, Chin Yun Holdings Ltd (Chin Yun), Daqin Holdings Ltd (Daqin), Heping Yang (Mr Yang), Yuqi Yang (Yuqi) and Yuhan Yang (Yuhan) against the plaintiffs, Kai Wei and Guolong Ou.
[2] The defendants say the appropriate sum for security is $320,000. They accept that payment should be on a staged basis.
[3] The plaintiffs agree that they should give security for costs and that it should be on a staged basis. But they say the amount proposed by the defendants is excessive. They do not assert that if such a sum were ordered they would be prevented from bringing the proceeding. They simply say that the amount of $320,000 is unfair. They propose a total sum of $125,000 payable in stages.
[4] Part of the dispute over quantum arises from disagreement as to how the proceedings should be categorised.2 Both counsel agree that scale costs provide a useful starting point. However, the defendants say the proceeding should be categorised as category 3, but the plaintiffs say category 2. There is also disagreement over the appropriate band.3 The defendants say band C and the plaintiffs say band B.
Background
[5] At the relevant times Mr Wei and Mr Ou were Chinese residents who wanted to invest in property in New Zealand. They claim that between September 2020 and August 2022 they advanced $14.3 million to Xing Guo (who had New Zealand residency) to buy or invest in New Zealand properties and hold the properties on their behalf.
[6] At the time the money was advanced to Mr Guo, he was the husband of Yuhan and therefore the son-in-law of Mr Yang and the brother-in-law of Yuqi.
1 High Court Rules 2016, r 5.45.
2 Rule 14.3.
3 Rule 14.5.
[7] Mr Yang, Yuqi and Yuhan are the shareholders of Daqin. The directors of Daqin are Mr Yang and Yuqi. Mr Yang is the sole shareholder of Chin Yun. The directors of Chin Yun at all relevant times were Mr Yang and another.
[8] Mr Wei and Mr Ou claim that without their knowledge Mr Guo used their money for other purposes, including buying different properties from those agreed and funding a new company to buy one of the agreed properties, a 28-unit hotel in Paihia. They also say that unbeknown to them Mr Guo transferred legal ownership in several of the properties for inadequate consideration to Chin Yun and Daqin. Mr Wei and Mr Ou also say that Mr Guo applied a significant portion of their funds for the benefit of Yuhan and Yuqi. Mr Guo is now bankrupt.
[9] Mr Wei and Mr Ou also claim that Chin Yun and Daqin knew Mr Guo used money advanced to him by them to acquire those properties. As a result, Mr Wei and Mr Ou claim an interest in certain properties now owned by Chin Yun and Daqin. They also allege that some of those funds were used by Mr Guo for unauthorised expenses, including payment of Mr Guo’s personal expenses and various advances to Mr Yang, Yuqi and Yuhan.
[10] The plaintiffs seek declarations that certain properties owned by Chin Yun and Daqin are held on trust for them and damages for the sums said to have been advanced by Mr Guo to the defendants.
[11] The defendants deny all of the plaintiffs’ claims. They say Mr Guo is a self- confessed fraudster who also defrauded the defendants of significant sums. They do not accept they knew that Mr Guo used the plaintiffs’ funds to acquire the properties concerned.
[12] The plaintiffs say that the defendants have conveniently omitted the fact that it was Yuqi who was the central figure in relation to the unauthorised loans taken out against Mr Yang’s properties and that Mr Guo was simply assisting Yuqi.
[13] As well as denying all of the plaintiffs’ claims, the defendants have raised affirmative equitable defences. The plaintiffs deny these defences.
Caveat proceedings
[14] Before they commenced this proceeding, Mr Wei and Mr Ou lodged caveats over properties owned by Chin Yun (the hotel at 130 Marsden Road, Paihia) and Daqin (14 Welland Place, Hillcrest, Auckland and 5 and 5A Sudeley Street, Ōrākei, Auckland) claiming an equitable interest in those properties by way of a bare or constructive trust.
[15] Chin Yun and Daqin, as the registered proprietors of the properties, disputed the caveats. Mr Wei applied to this court for an order that the caveats not lapse. Mr Ou applied for leave to lodge second caveats.4 The applications were heard by Associate Judge Gardiner (as she then was) shortly after Mr Wei and Mr Ou filed this proceeding. In her judgment, Associate Judge Gardiner ordered that Mr Wei’s caveat over 130 Marsden Road was to continue until further order of the court.5 Mr Wei’s application to sustain his caveats over 14 Welland Place and 5 and 5A Sudeley Street was dismissed. Mr Ou was granted leave to lodge a second caveat over 130 Marsden Road.
[16] Mr Wei and Mr Ou have now appealed the caveat judgment in relation to 14 Welland Place and 5 and 5A Sudley Street. Chin Yun has cross-appealed in relation to 130 Marsden Road. Those appeals are to be heard by the Court of Appeal on 31 March 2025.
Correspondence on security for costs
[17] The solicitors for the parties corresponded on security for costs between April and December 2024. I mention two of those letters.
[18] In a letter dated 23 May 2024, the defendants rejected the plaintiffs’ proposal of 20 May 2024 ($90,000 in three stages of $30,000 each) and indicated the defendants would accept security for costs in the sum of $320,000 staged as follows: $60,000 within 10 working days of discovery being given by the defendants; $60,000 within 10 working days of the close of pleadings date; $100,000 within 10 working days of
4 Mr Ou’s caveats lapsed due to oversight on the part of his solicitors.
5 Wei & Ou v Chin Yun Holdings Ltd [2024] NZHC 1602.
the date the plaintiffs’ briefs of evidence are to be served; and $100,000 no later than 10 working days before the commencement of trial.6 That is the proposal the defendants put forward in this application.
[19] By letter dated 17 December 2024, the plaintiffs offered to provide security for costs in the sum of $125,000 staged as follows: $40,000 to be paid 10 working days before affidavits of documents are due to be filed; $40,000 to be paid 10 working days before the defendants’ briefs of evidence are due; and $45,000 to be paid 20 working days before the commencement of the trial. That is the proposal the plaintiffs advance in this hearing.
Schedule of scale costs
[20] As part of the correspondence between the solicitors for the parties, the defendants prepared a schedule of scale costs calculated on a 2B and 3C basis.
[21] For convenience of discussion, I have added a further column of scale costs calculated on a 2C basis to the defendants’ schedule. The further column is inserted between the defendants’ 2B and 2C columns. A copy of the amended schedule with the additional column is annexed to this judgment as Annexure A.
[22]There are a few observations that need to be made about the schedule.
[23] First, Mr Stewart KC, counsel for the defendants, points out that the schedule makes no allowance for any interlocutory applications (which I will discuss later) nor any allowance for expert witness fees estimated by the defendants to substantially exceed $100,000 (also discussed later).
[24] Additionally, Mr Stewart accepts that the first stage in the schedule, commencement of defence, needs to be removed from the calculation. The statement of defence was filed before the application for security for costs dated 9 August 2024 was filed. Otherwise, Mr Stewart says all the other steps in the schedule should be included. I accept that submission. Although an application for security for costs is
6An earlier proposal by the defendants was for the sum of $310,000, staged as follows: $60,000 immediately, $60,000 prior to discovery, and $190,000 prior to setting down for trial.
addressed on a forward-looking basis, the assessment is made as at the date of filing the application, not the date upon which it is heard.7
[25] Mr Stewart notes that the schedule is based on a four-week trial. The parties disagree over the length of the trial. The defendants say that four to five weeks should be allowed. The plaintiffs’ estimate is three weeks. At a pre-trial conference and again in this hearing the plaintiffs noted their concern that if a five-week fixture was set down that would affect security for costs and categorisation issues because, the defendants say, it would give an incorrect impression of the complexity of the proceeding. The Judge at the pre-trial conference was concerned that if the hearing was set for three weeks, but it later became apparent that five weeks would be required, the three-week fixture would have to be vacated, a further fixture allocated, and this would lead to delay. The Judge accordingly directed the substantive proceeding be set down for a five-week hearing.
[26] Without changing his position on the trial estimate, Mr Stewart said the defendants were content to proceed on a four-week estimate for the purposes of this application.
[27] Mr Bigio KC, counsel for the plaintiffs, notes that both parties scale 2B calculations are around $160,000, based on a four-week trial. Mr Bigio says, taking into account steps that have already taken place, that figure reduces by $8,8438 to around $151,000.
[28] Mr Bigio goes on to submit that the total scale 2B costs of $151,000 and disbursements of $70,000 (for expert witnesses) add up to a figure of $221,000. The plaintiffs’ proposal of $125,000 would therefore result from a reduction of 63.58 per cent of the defendants estimated 2B scale costs: the total of $125,000 being made up of $55,000 (costs) and $70,000 (disbursements).
7 Jindal v Jarden Securities Ltd [2022] NZHC 572 at [23].
8This figure is incorrect. A deduction for commencement of the statement of defence, calculated on a 2B basis is $4,780 (as per the schedule).
Legal principles
[29]Applications for security for costs generally require a four-stage enquiry:9
(a)whether the defendant has met the thresholds in r 5.45(1) of the High Court Rules 2016 (HCR);
(b)whether it is just in all the circumstances to make an order;
(c)what is an appropriate quantum; and
(d)whether a stay should be ordered until any order is met.
[30] The plaintiffs accept that the threshold has been met. Mr Ou is resident in Thailand. That satisfies the provision in r 5.45(1)(a)(i), namely that a plaintiff is resident out of New Zealand. As to Mr Wei, he is present in New Zealand on a student visa. He says upon completion of his qualification in August this year, he will be able to apply for a Post Study Work Visa which will enable him to work for any employer and stay in New Zealand for up to three years. He says he intends to apply for residency in New Zealand after he obtains work in New Zealand.
[31] Neither plaintiff has provided any evidence of their means to pay costs. In certain circumstances a court will draw an adverse inference from a respondent’s failure to provide evidence of ability to pay. However, given that the plaintiffs accept the threshold has been met (and that Mr Ou is resident overseas) it is not necessary to take this point any further.
[32] The plaintiffs also accept that the second step, that is just in all the circumstances to make an order for security for costs, is satisfied. As already noted, the plaintiffs do not assert that an order that they give security for costs would prevent them from pursuing their claim. Rather, they suggest the quantum sought by the defendants is “unfair”.
9 Busch v Zion Wildfire Gardens Ltd (In rec and in liq) [2012] NZHC 17 at [2].
[33] Because the plaintiffs acknowledge that the first two stages of the enquiry are satisfied, I do not consider a merits assessment of the plaintiffs’ claim is necessary at this stage. The issue is the quantum (reference is made to the merits in addressing that issue).
[34] In relation to quantum, the court will award what it thinks fit in all the circumstances.10 In McNaughton v Miller the Court of Appeal stated:11
Whether or not to order security and, if so, the quantum of such security, are matters of discretion. What is called for is “an assessment in the round”. The amount of security is not necessarily to be fixed by reference to likely costs awards (although that may well be relevant). Ultimately, however, it is what the court thinks fit in all the circumstances. Those circumstances will generally include the:
(a)amount or nature of the relief claimed;
(b)nature of the proceeding, including the complexity and novelty of the issues, and therefore the likely extent of interlocutories;
(c)estimated duration of trial; and
(d)probable costs payable if the plaintiff is unsuccessful, and perhaps also the defendant’s estimated actual (ie solicitor and client) costs.
[35] The discretion involves a careful assessment of the circumstances of the case unfettered by facts from previous cases.12
Amount and nature of relief claimed
[36] Mr Stewart submits that the amount and nature of the relief claimed by the plaintiffs against the defendants is significant. In summary, the plaintiffs are seeking the return of properties estimated by the defendants as having an aggregate market value of approximately $15.8 million in late 2022/early 2023 as well as (as yet unspecified) damages and $3,561,237 (being the aggregate amount of sums claimed in the sixth, eighth and ninth causes of action in the first amended statement of claim).
10 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [27].
11 McNaughton v Miller [2022] NZCA 273 at [17].
12 A S McLachlan Ltd v MEL Network Ltd, above n 10, at [13]–[14].
[37] There are nine causes of action pleaded, alleging knowing receipt, dishonest assistance, money had and received, and breach of constructive trust by the defendants. As already noted, the defendants deny the claim. They say they were themselves defrauded by Mr Guo in a different manner (and that he mortgaged their properties and used the funds for his purposes). They raise various equitable defences in response, including as a bona fide purchaser for value without notice.
Complexity
[38] As well as determining the appropriate quantum for security, the court is required as part of this judgment to categorise the proceeding under r 14.3(1) HCR. Both counsel accordingly focused a large part of their oral submissions on the issue of complexity.
[39] As already noted, Mr Stewart submits the appropriate category is category 3. Category 3 proceedings are defined as “Proceedings that because of their complexity or significance require counsel to have special skill and experience in the High Court.”
[40] In terms of legal complexity, Mr Stewart refers to the number of causes of action (and the defendants’ response and their affirmative defences). Mr Stewart also submits the proceeding is factually complex: it involves extensive transactions across multiple properties over a number of years undertaken through a self-confessed fraudster; the individuals involved speak Chinese as their first language and interpreters will be necessary throughout; and cross-examination, especially of Mr Guo, Mr Yang and Yuqi, will be extensive.
[41] Mr Stewart says there will necessarily be significant and extensive forensic investigation by an expert accounting witness to determine the source and destination of funds and payments. He refers to “hundreds and hundreds” of entries in bank records and says it will be necessary for the expert accountant to unpick sales and purchases over a period of years involving seven properties. Mr Stewart says expert valuation evidence, valuing all the properties then and now, will be required.
[42] Mr Bigio submits the proceeding falls squarely within category 2. That category is defined in r 14.3(1) as “Proceedings of average complexity requiring
counsel of skill and experience considered average in the High Court.” He describes the proceeding as an “orthodox” equity case. Despite the many causes of action, Mr Bigio says they are all related and such causes of action are commonly pleaded together as a “basket” in these types of cases. He says there is no new law involved.
[43] As to the facts, Mr Bigio acknowledges that the claim has “some factual complexity and that expert forensic accounting evidence will be required”. But he says that factual complexity is not of such a degree so that the proceeding would fall within category 3.
[44] Having regard to the pleadings and having read the judgment of Associate Judge Gardiner, I accept that there is much detail that the parties will need to address in evidence and submissions and which the experts will need to consider.
[45] Then there are the nine causes of action and affirmative defences. But as Mr Bigio submits, they are all founded on the same set of facts.
[46] I also accept that because of the need for interpreters that four weeks is a conservative estimate for the substantive hearing.
[47] But all of those considerations do not elevate the proceeding to category 3. I consider the appropriate category is category 2. In making that decision, I am conscious that this categorisation is undertaken at an early stage of the proceeding. On the other hand, however, the court does have the benefit of the judgment of Associate Judge Gardiner which discusses the factual background and allegations in some detail.
[48] It will be open to the defendants to apply to the court for recategorisation of the proceeding at any later stage. Rule 14.3(2) HCR permits recategorisation if there are “special reasons”.13
13 See, for example, Heslop v Cousins HC Christchurch, CIV-2005-409-2833, 6 August 2007; and
Body Corporate 207624 v Grimshaw & Co [2003] NZHC 3381.
Banding
[49] Mr Stewart submits that in making an assessment of scale costs for the purpose of this application, the various steps in the schedule should fall into band C (although in discussion with the Court he accepted that some steps might be band B). Rule 14.5(2) HCR provides that band C is appropriate if a comparatively large amount of time for the particular step is considered reasonable.
[50] Mr Bigio disagrees. While he acknowledges that each step needs to be considered individually in terms of banding when the court comes to consider costs, he submits at this stage all steps should fall within band B. Rule 14.5(2) HCR provides that band B applies if a normal amount of time is considered reasonable for the particular step. Mr Bigio submits it is extraordinary for the defendants to assert that all steps of a proceeding should be assessed at the highest end of the scale at such an early stage.
[51] In the end, the appropriate time band for any interlocutory step will be fixed by the Judge or Associate Judge who deals with that step, and the banding for the trial steps will be fixed by the trial Judge determining costs after the substantive hearing. But it is necessary to make a preliminary assessment of each step in this application. I do not consider the court should proceed on the basis that all steps should be one band or the other.
Conference memoranda, conferences and amended pleading (Steps 9, 10, 11, 13 and
15)
[52] It seems to me (by reference to the annexed schedule) that stages 10, 11, 13 and 15, which relate to preparation of conference memoranda and appearing at conferences, should all be band B. There is nothing to suggest that band C is warranted. The court has as an example, the joint memorandum of counsel dated 20 September 2024 for a case management conference. While the memorandum appropriately addresses all necessary issues, including lists for tailored discovery, I would not put preparation of that memorandum in band C. The same can be said of the appearance at the conference that followed, having regard to the minute of the
Judge who presided at the conference. Accordingly, in my calculation of scale costs, I will treat these steps as category 2, band B.
[53] I accept that it is appropriate to make allowance for three of these steps as the defendants have done.
[54] Having regard to the pleadings already filed, I consider step 9, pleading in response to amended pleading should also be band B. I accept it is appropriate to make allowance for two of these steps, given that discovery and inspection have not yet occurred.
Discovery and inspection (Steps 20 and 21)
[55] Mr Stewart submits that discovery will be extensive. He says, for the defendants, complying with their discovery obligations will be time consuming and onerous. He says it will include property and conveyancing files in their control for the properties concerned, as well as related communications with Mr Guo over an eight-year period. Many documents will require translation into English.
[56] By way of example, Mr Stewart refers the court to the joint memorandum of counsel for the last case management conference dated 20 September 2024. The schedule to that memorandum sets out the categories of documents for tailored discovery. The categories for the defendants include the following:
(j)All correspondence, including emails, messages (including social media messages and other messages on any platform) and documents (including any valuations) relating to the acquisition and/or disposal of:
i.130 Marsden Road (including the first defendant’s attempt to sell 130 Marsden Road in 2020);
ii.14 Welland Place;
iii.84 Admirals Court Drive;
iv.5 Sudeley Street;
v.5A Sudeley Street;
(k)All conveyancing files relating to their acquisition and/or disposal of the properties set out in subparagraph (j) above;
(l)Correspondence and documents (including correspondence with mortgage brokers, loan applications, conveyancing files, bank statements) relating to the loans and how they were used secured by:
i.28 Sudeley Street, Orakei, Auckland;
ii. 7 Hadfield Way, Karaka, Auckland, during the relevant period;
(m)Correspondence (including WeChat messages) and bank statements relating to the alleged advances by the Plaintiffs to First and Fifth Defendants, being totals of around $640,030 to the First to Third Defendants, $1,401,657 to the Third Defendant for the project at 28 Sudeley Street, $1,198,476 to the Fourt Defendant, and $321,074 to the Fifth Defendant.
[57] Accordingly, Mr Stewart submits band C is appropriate for discovery and inspection.
[58] Mr Bigio submits that some discovery has already been given in the evidence in the caveat proceeding. He is also critical of the defendants, and submits that having agreed the categories of documents for discovery, they should at least have provided affidavit evidence to give the court an indication of the extent of discovery. That has not been done and further it seems that the discovery exercise has not yet started.
[59] There is some force in Mr Bigio’s criticism. Nevertheless, I consider the court has sufficient information including by reference to the categories of tailored discovery and having regard to Associate Judge Gardiner’s judgment, to make a determination that band C is appropriate for discovery (for the purposes of this application).
[60] As to inspection, the categories of documents that the plaintiffs are required to discover include:
b.All bank records relating to the transfer and/or remittance of the Plaintiffs’ funds to Mr Guo; and
c.all bank records of Mr Guo relating to the receipt, transfer, application or disbursement of the Plaintiffs’ funds by Mr Guo.
…
e. Documents recording or relating to the source of funds for the purchase of the property at 130 Marsden Road and the business known as Paihia Resort & Spa by Tango Investments NZ Limited and Tango Management Limited.
…
g. Documents recording or relating to the source of funds for the purchase of the properties at 14 Trinidad Road, Sunnynook, 14 Welland Place, Hillcrest, 5 and 5A Sudeley Street, Orakei, 10A Rukutai Street, Orakei, 84 Admirals Court Drive, Greenhithe.
[61] The court is told that Mr Guo’s bank records have already been produced in the caveat proceeding. However, the defendants say that Mr Guo had other bank accounts. I consider band C is also appropriate for inspection for the purposes of this application.
Preparation of briefs of evidence (Step 33); Preparation for hearing (Step 33B); Appearance at witness hearing (Step 34)
[62] Mr Stewart submits that preparation of witness briefs and for trial generally will likely occupy many weeks if not months. He says the defences raised will involve assessment of fair value. Each transaction will need to be forensically analysed, traced, and assessed by financial accounting and valuation experts.
[63] I accept that submission and had it been necessary I would have applied band C to step 33. But in terms of Schedule 3 HCR, the same allowance is given for all bands.
[64]The same applies to preparation for the hearing (step 33B).
[65] For step 34, appearance at witness hearing, it is for the time occupied by the hearing regardless of the band.
Second counsel (Step 35)
[66] Mr Bigio did not take issue with an allowance being made for second counsel. The sum for that step is simply 50 per cent of the allowance for the appearance for principal counsel. I consider such allowance should be made.
My assessment of scale costs
[67] My assessment of likely scale costs based on the above, namely category 2 and with some steps at band B and some at band C, is $178,533. My calculations are set out in Annexure B to this judgment.
Any deductions
[68] Insofar as past awards of security are a legitimate guide, they generally represent some discount on the likely award of costs as calculated under Schedule 3 HCR. Mr Bigio refers the court to cases where a 25 per cent reduction has been made: Camelot Hotel v Square Holdings Ltd;14 Morrell v World Solar Ltd;15 and Sandilands v Signal.16 An example of a case where a 20 per cent reduction was made is Purau Moorings Association Inc v Canterbury Regional Council.17 A further case where a discount was given is Keezz Ltd v Waikato District Health Board.18 The defendant had made an assessment of costs based on the 2B scale and excluding court fees and disbursements of $63,813. The defendant sought security of $50,000, which represented a small discount on scale costs. The court fixed $50,000 as security for costs.
[69] On the other hand, there are examples of cases where no reduction has been made. In Sisson v IAG New Zealand Ltd,19 Associate Judge Osborne (as he then was) said he viewed the case before him as slightly unusual. Ms Sisson was bankrupt. She had provided no information as to any assets or income outside frozen assets. Additionally, Ms Sisson’s former husband, who because of the background, may have been expected to later assist Ms Sisson, was himself bankrupt and the Judge considered he was unlikely to be able to assist. In those circumstances, the Judge considered it would not be appropriate or just to award security other than on the basis of the full 2B calculation.20
14 Camelot Hotel Ltd v Square Holdings Ltd [2016] NZHC 82.
15 Morrell v World Solar Ltd [2018] NZHC 518.
16 Sandilands v Signal [2020] NZHC 2354.
17Purau Moorings Association Inc v Canterbury Regional Council [2018] NZHC 462, at [53]. Note that in Regional Council’s reply the reduction was calculated at 33 per cent.
18 is Keezz Ltd v Waikato District Health Board [2020] NZHC 2330.
19 Sisson v IAG New Zealand Ltd [2014] NZHC 616.
20 At [78]–[79].
[70] In Flujo Sanguineo Holdings Pty Ltd v Merisant Company Inc, Associate Judge Bell said:21
… when the Court fixes security for costs it does not invariably fix the amount of security at 100 percent of the scale costs. There is some recognition that a plaintiff may have some prospect of success. The amount of security is often adjusted in view of the Court’s view of the ultimate success of the proceeding. If a plaintiff’s case is a guaranteed winner cert [sic] there would be no reason for ordering security. If the defendant’s case is watertight, there would be reason to order high security. In a case like this where the merits are mixed, it is hard to predict. Some discounting from the scale is required.
[71] It is not easy to assess the merits at this early stage. Having said that, the court does have the benefit of the judgment in the caveat proceeding. Associate Judge Gardiner found in favour of the plaintiffs in relation to one of the properties. The Judge said:22
[95] Therefore, it is at least reasonably arguable that Chin Yun Holdings received 130 Marsden Road with actual knowledge that the applicants had contributed to the purchase of the property and had a beneficial interest in the property, and that Chin Yun Holdings intended to defeat that interest by becoming the registered owner. It is therefore reasonably arguable that any beneficial interest was not extinguished on the registration of Chin Yun Holdings as the owner of the land, and the company holds the property subject to any beneficial interest that existed prior to registration.
…
[111] Overall, I consider that the applicants have laid a sufficient evidential foundation for their claimed beneficial interest in 130 Marsden Road which arguably was not extinguished on transfer to Chin Yun Holdings due to Mr Yang’s arguable knowledge of their interest.
[112] On that basis, I am satisfied that the caveat over 130 Marsden Road should be sustained pending the applicants advancing substantive proceedings.
[72] However, the Judge found against the plaintiffs in relation to the other properties. As noted, there is an appeal and a cross-appeal yet to be heard.
[73] As against all of that, Mr Stewart submits there has been no allowance made in his calculations for interlocutory applications. He says interlocutory applications arising out of discovery are likely. He also notes that it is unclear at this stage whether
21 Flujo Sanguineo Holdings Pty Ltd v Merisant Company Inc. [2019] NZHC 2891 at [24].
22 Wei & Ou v Chin Yun Holdings Ltd above n 5, [2024] NZHC 1602 at [95] and [111]–[112].
a non-party discovery order in relation to documents in the possession or control of Mr Guo will be required.
[74] In response, Mr Bigio submits that given the parties have already agreed upon the categories of tailored discovery, an application for further and better discovery is less likely than otherwise would be the case. As to non-party discovery in relation to Mr Guo, Mr Bigio submits that this has nothing to do with the plaintiffs and they should not be required to give security in relation to this issue.
[75] In the end, given that it is unclear whether interlocutory applications will be required, I put that to one side in determining the appropriate level of security.
[76] Having regard to the fact that the plaintiffs have demonstrated in the caveat proceedings some prospect of success, I consider it is appropriate to discount my assessment of scale costs by 20 per cent. That results in a sum of $142,826.40, which I will round down to $142,826.
Disbursements – expert witnesses
[77]Finally, there is the issue of expert witness fees.
[78] Mr Stewart submits that expert witnesses are expensive. Parties bringing complex claims of this kind can expect to be required to meet the costs of experts required to respond to such claims. He says the defendants do not yet have sufficient information to project what their expert witness fees are likely to be, but in the circumstances, he says it is not unrealistic to expect those fees will substantially exceed $100,000. Mr Stewart makes that assessment based on the number of transactions to be forensically examined, traced, and analysed, and the number of properties requiring retrospective valuation.
[79] In response, Mr Bigio submits that where counsel have submitted their own estimates, with no estimate provided by experts themselves, the court has previously proceeded on a general impression and experience of past fees and comparable litigation, and adopted for the purposes of security for costs assessment purposes, the
lower end of the range.23 Mr Bigio submits that at this stage of the proceeding, and in the absence of any further details, allowing expert fees of $50,000 – $70,000 is reasonable. In his written submissions and in making the plaintiffs’ calculation, Mr Bigio adopted the figure of $70,000. However, in oral submissions, Mr Bigio submitted the appropriate figure would be $50,000. He says that is appropriate in circumstances where there is no affidavit from an expert witness with a preliminary assessment to assist the court.
[80] In Camelot Hotel Ltd v Square Holdings Ltd, referred to by Mr Bigio, counsel had submitted that a conservative estimate for the expert witnesses involved would be
$50,000 if the experts’ prepared briefs and their evidence was agreed after conference between experts or $100,000 if the experts were also required to give evidence at trial. The Judge said:24
In relation to sums of such significance it is somewhat unsatisfactory for the Court to be left with no estimate of fees made by the experts themselves. I therefore must proceed on a general impression and experience of past fees in comparable litigation. A range of $50,000 to $100,000 appears realistic. However, for the purposes of security for costs assessment, and in the absence of actual evidence of fees estimated by the experts themselves, I will adopt a figure of $50,000.
[81] The court in this case certainly would have been helped by having an estimate from the experts. As in Camelot Hotel Ltd, the court is left to proceed on a general impression and the court’s experience of fees in comparable litigation. While the figure of $100,000 or more does not seem unreasonable, in the absence of evidence I propose to adopt the figure of $70,000.
Amount of security
[82] Accordingly, the figures I take into account when setting the amount of security will be $142,826 (being discounted scale costs) plus $70,000 for expert witnesses. The total is $212,826.
23 Camelot Hotel v Square Holdings Ltd, above n 14, at [31].
24 At [31].
Orders
[83]I order:
(a)The proceeding is categorised as category 2. (Any final determination of the appropriate band(s) will be made by the Judge hearing any interlocutory applications and the trial Judge in their costs decision after the substantive hearing).
(b)The plaintiffs shall provide security for costs in the sum of $212,826.
(c)Security in the above sum is to be provided in stages, as follows:
(i)$50,000 no later than 10 working days before the defendants are required to give discovery.
(ii)$50,000 no later than 10 working days before the close of pleadings date;
(iii)$50,000 no later than 10 working days before the date on which the plaintiffs’ briefs of evidence are to be served; and
(iv)$62,826 no later than 10 working days before the commencement of the trial.
(d)Each of the above tranches is to be paid into court and held on an interest-bearing deposit pending further order of the court.
(e)The proceeding is stayed if payments are not paid by the dates ordered.
(f)The defendants have leave to apply to recategorise the proceeding.25
25 Although leave is probably not required. Refer r 14.3(2) HCR.
Costs
[84] Neither the plaintiffs nor the defendants have been entirely successful. The level of security ordered falls between the quantum proposed by each side.
[85] In those circumstances, the parties may be prepared to let costs lie where they fall. However, if the parties do wish to be heard on costs, I direct that the defendants file and serve their memorandum within 10 working days of the date of this judgment. The plaintiffs may file and serve their response within 10 working days of service of the defendants’ memorandum.
[86] Costs memoranda should not exceed four pages. I will determine costs on the papers.
Gordon J
Solicitors: Tompkins Wake, Auckland
Heritage Law, Auckland
Counsel:R Stewart KC, Auckland D Bigio KC, Auckland
ANNEXURE A
CIV-2024-404-387 - Wei & anor v Chin Yun Holdings Ltd & ors - Scale Costs Calculations
Daily recovery rate ($)
Category 2 $2,390.00
Category 3 $3,53000
| COSTS | Step | Description | B | 2B | C | 2C | 3C |
| 2 | Commencement of defence Statement of defence – allow 1 | 2 | $4,780.00 | 6.0 | $14,340.00 | $21,180.00 |
9 Pleading in response to amended pleading – allow 2
$1,434.00 $4,780.00 $7,070.00 10 Preparation for first case management conference - Joint memorandum 04 $956.00 1.0 $2,390.00 $3,530.00 11 Filing memorandum for first or 04 $956.00 1.0 $2,390.00 $3,530.00
06 $1,434.00
2.0 $4,780.00
$7,060.00
subsequent case management conference – allow 3
$956.00
$2,390.00
$3,530.00
$956.00 $2,390.00 $3,530.00 13 Appearance at first or subsequent 03 $717.00 0.7 $1,673.00 $2,471.00 case management conference – allow 3 $717.00 $1,673.00 $2,471.00 $717.00 $1,673.00 $2,471.00 15 Preparation for and appearance at pre-trial conference 05 $1,195.00 1.0 $2,390.00 $3,53000 20 List of documents on discovery 2.5 $5,975.00 7.0 $16,730.00 $24,710.00 21 Inspection of documents 1.5 $3,585.00 6.0 $14,340.00 $21,180.00 33 Preparation of briefs of evidence All bands - For 20 day trial 13.75 $32,862.50 $32,862.50 $48,537.50 33B Preparation for hearing All bands - For 20 day trial 13.75 $32,862.50 $32,862.50 $48,537.50 34 Appearance at witness hearing Time occupied by hearing 20 $47,8OO.OO $47,800.00 $70,600.00 35 Second counsel $23,900 00 $23,900.00 $35,300.00
DISBURSMENTS Court fees
Expert witness fees
TOTAL $161,803.00 $209,364.00 $309,228.00
ANNEXURE B
Wei v Chin Yun Holdings Limited
Schedule for Scale costs (4-Week Trial)
Daily recovery rate
Category 2: $2,390.00
Step Description Basis (days) $ Amount 9 Pleading in response to amended pleading – 2B (0.6 days) 1,434.00 Allow 2 1,434.00 10 Preparation for first case management conference – Joint memorandum 2B (0.4 days) 956.00 11 Filing memorandum for first or subsequent 2B (0.4 days) 956.00 case management conference – Allow 3 956.00 956.00 13 Appearance at first or subsequent case 2B (0.3 days) 717.00 management conference – Allow 3 717.00 717.00 15 Preparation for and appearance at pre-trial conference 2B (0.5 days) 1,195.00 20 List of documents on discovery 2C (7 days) 16,730.00 21 Inspection of documents 2C (6 days) 14,340.00 33 Preparation of briefs of evidence 13.75 days 32,862.50 33B Preparation for hearing 13.75 days 32,862.50 34 Appearance at witness hearing 20 days 47,800.00 Second counsel 20 days 23,900.00 Total
$178,533.00
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