Zheng v Deng

[2024] NZHC 1773

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-002730

[2024] NZHC 1773

BETWEEN

LU ZHENG

First Plaintiff

ORIENT CONSTRUCTION LIMITED
Second Plaintiff

AND

DONGLIN DENG

First Defendant

BIN JIANG
Second Defendant

ORIENT HOMES LIMITED
Third Defendant

.../intituling cont over

Hearing:	On the papers
Counsel:	D Zhang and E Tie for Plaintiffs JD Turner for First Defendant
Judgment:	3 July 2024

JUDGMENT OF DOWNS J

(Costs)

This judgment was delivered by me on Wednesday, 3 July 2024 at 2 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

Solicitors:

Advent Ark Lawyers, Auckland.

McVeagh Fleming Lawyers, Auckland.

ZHENG v DENG [2024] NZHC 1773 [3 July 2024]

EVERSOLID CONSTRUCTION LIMITED

Fourth Defendant

HONGLAN LIU
Fifth Defendant

D & R HOMES LIMITED
Sixth Defendant

YAN JIN
Seventh Defendant

TONG ZHU

Eighth Defendant

YAOKUN CHEN
Ninth Defendant

The issue

[1]    Lu Zheng alleged a partnership with Donglin Deng. I held no partnership existed.1 The Court of Appeal2 and Supreme Court3 corrected that. This judgment determines costs in light of those appeals.4

[2]    Costs are not contested in relation to the recent taking of an account of the partnership.5

Success of the parties

[3]    Mr Deng continues to characterise himself as the real victor in the litigation. Mr Deng succeeded in resisting seven of eight of Mr Zheng’s causes of action and all claims brought by Orient Construction Ltd.6 So, Mr Deng contends he did not fail in terms of r 14.2(1)(a) of the High Court Rules 2016.

[4]    I do not accept this characterisation. As I observed earlier in this litigation, the most important cause of action “by some margin” was whether a partnership existed.7 Mr Zheng succeeded on that cause of action, and it occupied the preponderance of trial time. So, Mr Zheng succeeded on an “overall basis”8 and is entitled to costs.9 That said, Mr Deng’s success on the other causes of action—success undisturbed by either the Court of Appeal or Supreme Court—requires recognition. This is because costs may be reduced to recognise partial success of the other party.10

[5]    Mr Zheng accepts his costs should be discounted by 25 percent to  reflect   Mr Deng’s success. This level of reduction is apt. While Mr Zheng was unsuccessful

1      Zheng v Deng [2019] NZHC 3236 [High Court judgment].

2      Zheng v Deng [2020] NZCA 614, [2021] NZCCLR 30 [Court of Appeal judgment].

3      Deng v Zheng [2022] NZSC 76, [2022] 1 NZLR 151 [Supreme Court judgment].

4      I ordered Mr Zheng pay Mr Deng costs and disbursements: Zheng v Deng [2020] NZHC 959 [First costs judgment]. That order was set aside: Court of Appeal judgment, above n 2, at [140].

5      Zheng v Deng [2024] NZHC 586. At [34] I considered each party had some success.

6      Orient Construction.

7      Zheng v Deng [2022] NZHC 2595 at [7].

8      Middeldorp v Avondale Jockey Club Inc [2021] NZSC 117 at [13].

9      However, I am not persuaded Mr Zheng should have costs for responding to Mr Deng on this issue. Costs on costs are unusual, and courts are reluctant to award them: SKP Inc v Auckland Council [2019] NZHC 1665 at [9].

10 High Court Rules 2016, r 14.7(d).

on seven causes of action, most of the trial was directed at whether a partnership existed and, as observed, Mr Zheng succeeded on that.

Discrete points of disagreement

[6]The parties disagree on seven points.

[7]    First, Tina Payne’s expert fees. Ms Payne is a forensic accountant who was called by Mr Zheng to provide expert evidence at trial. Some of Ms Payne’s testimony was inadmissible,11 but her evidence in relation to the internal accounts was substantially helpful.12 So too  Ms  Payne’s  examination  of  transfers  of  funds.13 Ms Payne’s evidence was also considered by the Court of Appeal, although that Court’s costs order did not include her fees as Mr Deng contends.14 There is no suggestion her $18,737.81 fee was unreasonable. Mr Zheng may claim it.

[8]    Second, time allocation for trial preparation. Mr Zheng seeks Band C costs for the commencement of proceedings and the pre-trial conference. Band C applies if a comparatively large amount of time for a particular step is reasonable.15 In my first costs judgment, I determined the claim required more preparation than usual, and Band C was appropriate for preparation for trial.16 Band C also accords the Supreme Court’s characterisation of the case as “factually complex”.17 I allow Band C for the sought preparatory steps.

[9]    Third, time allocation for discovery. The same analysis applies. Band C also reflects Mr Deng’s demand for discovery of all emails, including some he already had.

[10]   Fourth, Mr Zheng’s chronology dated 6 November 2019. Mr Zheng says his chronology was necessary to address disagreements arising from Mr Deng’s “statement of agreed facts” that were not, in fact, agreed. Mr Deng says the chronology was argumentative and of no help.

11 High Court judgment, above n 1, at [68].

12 At [65].

13 See [107].

14     Zheng v Deng [2021] NZCA 190.

15     High Court Rules, r 14.5(2)(c).

16 First costs judgment, above n 4, at [4].

17 Supreme Court judgment, above n 3, at [52].

[11]   I consider the chronology provided  a useful summary of  events  spanning  14 years. Mr Zheng should have  costs  for  its  preparation.  Schedule  3  of  the High Court  Rules  does  not   specify   the  time  for  a  comparative  chronology.    A reasonable amount of time can be determined, by analogy,18 to step 19: admission of facts. Band C is again appropriate.

[12]   Fifth, invoices addressed to Orient Construction. Advent Ark Lawyers acted for both Mr Zheng and Orient Construction but as observed, the latter’s causes of action failed. The invoices from Advent Ark Lawyers for claimed disbursements are addressed  to  Orient  Construction  only.  The  same  is  true  for  invoices  from   KK Translation and Interpreting Ltd. Mr Zheng accepts some disbursements were paid by Orient Construction. He adjusted his claim for all disbursements to remove GST.19

[13]   Mr Zheng relies on Smith v King to support his claim for disbursements paid by another (unsuccessful) party.20 In that case, Gendall J held it was a reasonable inference the plaintiff mayor would be liable to account to the Council, a non-party, “as the funder of the proceedings”.21

[14]   Mr Zheng is the sole shareholder and director of Orient Construction, but the company has its own legal personality.22 I have not been provided any information from which to infer Mr Zheng will be required to repay Orient Construction for disbursements it has paid. The non-profit rule is engaged.23 So, Mr Zheng is not entitled to any disbursements he has not personally paid.

[15]   Sixth, costs for second counsel. Mr Zheng seeks costs for 10 days for second counsel’s operation of the bundle. On nine of those days, the bundle was operated by junior counsel without a practising certificate. Under the High Court Rules, a lawyer

18     High Court Rules, r 14.5(1)(b).

19     Orient Construction is GST registered. GST on disbursements is not allowed if a successful party is registered for GST. See Body Corporate 324525 v Stent [2017] NZHC 2948 at [36].

20     Smith v King [2021] NZHC 1252.

21 At [48].

22     Companies Act 1993, s 15.

23     Dunedin Catering Supplies v Mr Chips Ltd  [2013] NZHC 1815 at [59]; and High Court Rules, r 14.2(1)(f).

is a person who holds a (current) practising certificate.24 In the context of self-represented parties, a party who does not hold a practising certificate “must be considered … a lay litigant for the purposes of costs.”25 It is not clear I have a discretion to reach a different conclusion. That being so, time for second counsel without a practising certificate may not be claimed.

[16]   Seventh, settlement communications. Two without prejudice save as to costs offers were made. On 12 November 2019, the week before trial, Mr Zheng sought the sum of $600,000 to settle. On 13 November 2019, Mr Deng proposed settlement on the basis of no payment and costs to lie where they fell. Mr Deng says Mr Zheng’s unrealistic offer precluded settlement.

[17]   Costs may be refused or reduced where the party claiming costs has contributed unnecessarily to the time or expense of the proceedings by failing, without reasonable justification, to accept an offer of settlement.26 I consider Mr Zheng was justified in rejecting Mr Deng’s settlement offer, particularly as it involved Mr Zheng accepting his claim of a partnership was futile.

Outcome

[18]Mr Deng must pay costs of $106,026.40 to Mr Zheng.

[19]That figure reflects:

(a)Band C for: trial preparation; discovery; and Mr Zheng’s chronology.

(b)Second counsel for one day.

(c)A 25 percent reduction for Mr Deng’s success on other causes of action.

24 High Court Rules, r 1.3; and Lawyers and Conveyancers Act 2006, s 6.

25     Deliu v Independent Police Conduct Authority [2022] NZHC 1411 at [7]–[8], quoting Re Cameron (deceased) HC Dunedin A56/84, 8 March 1995.

26     High Court Rules, r 14.7(f)(v).

[20]   Mr Deng must also pay Mr Zheng for disbursements incurred by Mr Zheng (not paid for by Orient Construction). On the evidence provided, this is confined to Ms Payne’s fees of $18,737.81 (including GST).

……………………………..

Downs J