Xu v Liu aka Hu

[2017] NZHC 2137

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-002384 [2017] NZHC 2137

BETWEEN

JIANGANG XU

First Plaintiff

YOUZHI ZHU Second Plaintiff

AND

JIN LIU (AKA DANIEL HU) First Defendant

PING WANG (aka SHERRY WANG)

Second Respondent/Defendant

Hearing:	On the papers
Judgment:	4 September 2017

JUDGMENT OF KATZ J [Costs]

This judgment was delivered by me on 4 September 2017 at 2:00pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:           Jesse & Associates, Auckland Northern Legal Lawyers, Auckland Glaister Ennor, Auckland

Counsel:           A Sharp, Chancery Chambers, Auckland

G P Blanchard QC, Shortland Chambers, Auckland

XU v JIN LIU (AKA DANIEL HU) [2017] NZHC 2137 [4 September 2017]

Introduction

[1]      On 20 July 2017 I dismissed two applications brought by the defendants.  In the first application the defendants sought summary judgment or strike-out of the plaintiffs’ first cause of action.   In the second application the defendants sought a stay or dismissal of the plaintiffs’ second and third causes of action.  The plaintiffs now seek costs in respect of both of those applications.

[2]      It is common ground that the proceedings are properly classified as Category

2,  being  a  proceeding  of  average  complexity  requiring  counsel  of  skill  and experience considered average in the High Court.1    In terms of time allocation, the plaintiffs seek Band B for a number of steps, but Band C for preparation of affidavits and for all steps taken after the making of a Calderbank offer on 18 May 2016.  The plaintiffs’ claim is capped at $28,640, however, so as not to exceed the actual costs they have incurred.

[3]      The defendants submit that costs should be awarded on a 2B basis.  They also submit that there are a number of errors in the plaintiffs’ calculations, which I will address first.

Errors in plaintiffs’ calculations

[4]      The defendants submit that the plaintiffs’ costs claim errs in the following

respects:

(a)      The Category 2 recovery rate used by the plaintiffs is $1,990 when it should be $2,230.

(b)The plaintiffs’ calculations include a number of items from Schedule 3 of the High Court Rules (“Rules”) that are not properly claimable in the context of interlocutory applications, as they apply to trials only.

(c)       The  plaintiffs’  calculations  wrongly  include  costs  for  obtaining

judgment without appearance.  That item cannot apply to a defended hearing.

1      High Court Rules 2016, r 14.3(1).

(d)      Time allocation “A” has been used in some parts of the plaintiffs’

claim when scale “B” was apparently intended.

[5]      The plaintiffs acknowledge errors (a) and (d), but otherwise submit that the fact that no express provision is made in Schedule 3 of the Rules for particular matters does not mean that costs cannot be claimed in respect of such matters.  That is clearly correct and the defendants do not dispute the point, although they note that costs cannot be claimed in relation to a trial and undefended hearing that did not take place.

[6]      Ultimately, where items are claimed that fall outside the scope of the default provisions in Schedule 3 of the Rules, the onus is on the party claiming them to establish that payment of such items is justified in all the circumstances of the case. The defendants have failed to do so.  I accept the defendants’ submissions in relation to the disputed items.

Affidavits

[7]      In relation to the preparation of affidavits, the plaintiffs submitted that:

[T]his is a matter in which the time in preparing the affidavits for hearing, and  allied  to  that  the  considering  the  Defendants’  affidavits  and  the numerous annexures to them, reasonably should be determined on Scale C as the time prescribed by Scale B is insufficient to award the Plaintiffs a reasonable rate of recovery for the steps reasonably taken.   Scale C, it is submitted,  is  more  appropriate  in  the  circumstances  and  more  fairly represents that cost reimbursement to the Plaintiffs that is reasonable in the circumstances.

[8]      The defendants dispute that increased costs should be awarded for the length or the number of the affidavits filed.  The defendants say that none of the affidavits were “unusually long”.   Further, while there were more affidavits than normal, this was largely because there were two applications to be determined.   The costs calculations, the defendants say, already factor in the additional application. Again, I accept  the  defendants’ submissions  on  this  issue.    There  is  no  justification  for applying Band C to this item.

The Calderbank offer

[9]      The  plaintiffs   claim   increased   costs   on   grounds   that   the  defendants unreasonably rejected an offer to stay the proceedings, contained in a letter dated 18

May 2016.  In that letter the plaintiffs offered to stay the claims brought by them so that all proceedings could take place in China, on specified terms.

[10]     The defendants say it was not unreasonable for them to reject that offer.  Had the defendants accepted the offer and returned to China they would have been able to deal with the RMB 24 million claim (the “overnight loans”).  However, the RMB 34 million default judgment (the “daytime loans”) would still have been at issue.  The defendants say that when the Calderbank offer was received it was unclear whether the judgment as to the daytime loans could be set aside in the Hangzhou People’s Court.  It only transpired later that this could be done.  But the reasonableness of a party’s rejection of a Calderbank offer must be assessed at the time of rejection, not

against the subsequent result.2    The reasonableness of the rejection is based on (a)

the size and timing of the offer, (b) the reasonable expectations of the party refusing the offer, and (c) the parties’ ability at the time of the offer to assess the merits of the case.3

[11]     Further, the defendants note that the plaintiffs’ notice of opposition to the defendants’ application  for  summary  judgment  and  strike-out  in  relation  to  the daytime loans judgment had not yet been served when the offer was made.   This made it more difficult for the defendants to fully assess the merits of their own case. Counsel’s memorandum summarised the defendant’s position as follows:

Their thinking was that, if their application for summary judgment or strike out in relation to the RMB 34m default judgment was successful, they would then be able to concentrate on fighting the claim in relation to the RMB 24m in China if their non-conveniens argument succeeded or in New Zealand if it was unsuccessful.   Given the uncertainty and complexity that they were confronted with, this was not an unreasonable position for them to take at the relevant time.

2      See New Zealand Sports Merchandising Ltd v DSL Logistics Ltd HC Auckland CIV-2009-404-

5548, 19 August 2010 at [36].

3      See Samson v Mourant [2016] NZHC 1119 at [44]; and Weaver v HML Nominees Ltd [2016] NZHC 473 at [30]. And see generally McGechan on Procedure (looseleaf ed, Thomson Reuters) at [HR14.6.02].

[12]     In  my  view  it  was  not  unreasonable  for  the  defendants  to  reject  the Calderbank offer, based on all of the information available to them at the time.  It is therefore not appropriate to award increased costs for the period following their rejection of the Calderbank offer.

Result

[13]     Given the various findings I have made above, the appropriate award of costs is that set out in the schedule to the defendants’ memorandum of 25 August 2017.  I accordingly  direct  that  the  defendants  meet  the  plaintiffs’ costs  in  the  sum  of

$10,927.

Katz J