Zheng v Deng [2021] NZCA 190 (17 May 2021)

Last Updated: 25 May 2021

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA

CA37/2020 [2021] NZCA 190

	BETWEEN	LU ZHENG First Applicant ORIENT CONSTRUCTION LIMITED Second Applicant
	AND	DONGLIN DENG First Respondent ORIENT HOMES LIMITED Second Respondent

CA303/2020
	BETWEEN	LU ZHENG Appellant
	AND	DONGLIN DENG Respondent

Court:	Goddard, Duffy and Nation JJ
Counsel:	D Zhang and E Tie for Applicants J D Turner and L X Huang for Respondents
Judgment: (On the papers)	17 May 2021 at 11.00 am

JUDGMENT OF THE COURT

A The claims for costs referred to at [3] are determined as follows:

(a) The claim for costs items 15 and 17 in respect of the costs appeal is not allowed.

(b) The claim for costs in respect of the application for leave to adduce further evidence is allowed in respect of item 8, but not item 11: a total of 1 day.

B The claims for disbursements referred to at [4] are determined as follows:

(a) The claim for photocopying/printing expenses of $254.90 is allowed.

(b) The claim for postage expenses of $217.55 is allowed.

(c) The claim for expenses incurred in connection with preparation of the paper copy case on appeal is allowed to the extent of $960 plus binding material costs of $345: a total of $1,305.

(d) The claim for gown hire is allowed in respect of one gown: $17.25.

100. We make no order as to costs in respect of the application for determination of costs in this Court.

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REASONS OF THE COURT

(Given by Goddard J)

Introduction

• [1] Mr Zheng appealed to this Court against two High Court judgments: a substantive judgment determining his claims against the respondents (CA37/2020), and a costs judgment (CA303/2020). His appeal against the substantive judgment was allowed (CA judgment).^[1] The proceeding was remitted to the High Court to take an account of the dealings of the partnership that this Court found to exist between Mr Zheng and Mr Deng. This Court also set aside the High Court’s cost orders and ordered that costs in the High Court were to be determined by that Court. Costs in this Court were awarded to Mr Zheng for a standard appeal on a band B basis. This Court did not certify for second counsel.^[2] This judgment determines a number of disputes between the parties in relation to costs and disbursements in this Court.^[3]

Cost orders sought by Mr Zheng

• [2] Mr Zheng seeks orders from this Court that Mr Deng pay him $54,492 in costs and $13,831.65 in disbursements. Mr Deng challenges a number of those costs and disbursements. He submits that he should pay costs of $31,787 and disbursements of $5,315.
• [3] Mr Deng disputes the following costs items:

(a) costs for steps taken in the costs appeal after the commencement of the appeal as of right; and

(b) costs for the application seeking leave to adduce further evidence.

• [4] Mr Deng disputes the following disbursements:

(a) photocopying/printing expenses: $254.90;

(b) postage expenses: $217.55;

(c) expenses incurred in preparation of a paper copy of the case on appeal: $7,776.20; and

(d) the cost of gown hire for senior counsel.

The law

• [5] Rule 53A(1)(c) of the Court of Appeal (Civil) Rules 2005 (Rules) provides that costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the appeal. The reasonable time allocations for scale costs are set out in sch 2. This Court directed that band B should apply: that is, a comparatively large amount of time was considered reasonable for preparation for this appeal because of the number of the issues and the volume of relevant material.^[4]
• [6] The principles that govern recovery of disbursements in this Court are the same as the principles applied in the High Court. Rule 14.12(1) of the High Court Rules 2016 defines the term “disbursement” as follows:^[5]

disbursement, in relation to a proceeding,—

(a) means an expense paid or incurred for the purposes of the proceeding that would ordinarily be charged for separately from legal professional services in a solicitor’s bill of costs; and

(b) includes—

(i) fees of court for the proceeding:

(ii) expenses of serving documents for the purposes of the proceeding:

(iii) expenses of photocopying documents required by these rules or by a direction of the court:

(iv) expenses of conducting a conference by telephone or video link; but

(c) does not include counsel’s fee.

• [7] A disbursement is recoverable if, among other things, it was reasonably necessary for the conduct of the proceedings, reasonable in amount, and not disproportionate in the circumstances of the proceeding.^[6]

Disputed costs

(a) Steps taken in the costs appeal after the commencement of the appeal

• [8] Mr Zheng claims costs for steps taken in the costs appeal under the following items in sch 2 of the Rules: item 15 (preparation of case on appeal — 1 day for the costs appeal, in addition to the 2 days allowed for the substantive appeal); and item 17 (preparation for hearing of appeal — 6 days for the costs appeal, in addition to the 6 days allowed for the substantive appeal).
• [9] Mr Deng submits that there should not be duplicate scale costs in relation to any steps taken in the costs appeal after the notice of appeal was filed. Mr Deng says that although the substantive appeal and costs appeal were brought separately, they were case managed together, required the same case on appeal, and were heard together. Only one set of costs for items 15 and 17 can be claimed.
• [10] Mr Zheng submits that the substantive appeal and the costs appeal involved completely different sets of facts and points of law. There was little duplication of work between the two appeals. Regarding item 15, Mr Zheng’s costs claim recognises that the preparation of the case on appeal for costs required less work than the substantive case on appeal and that is reflected in a claim for only 1 day for that step, as opposed to the 2 days that a party would ordinarily be entitled to claim under band B. Where there has been duplication of work (for example, for the pre-hearing teleconference and appearance at the hearing of the appeal) Mr Zheng has only claimed one set of costs.
• [11] The costs appeal was confined to two issues: refusal of costs for a successful application for leave to amend pleadings, and the recoverability as a disbursement of the fee charged by Mr Deng’s accounting expert, on the basis that it was not reasonably necessary and was not reasonable in amount. These were narrow issues that did not require a significant amount of additional material to be included in the case on appeal. The band B allowance of 2 days is a reasonable time allowance for the preparation of a combined case on appeal for both the substantive appeal and costs appeal. A further allowance for item 15 in relation to the costs appeal is not justified. We also consider that 6 days is an adequate allowance under item 17 for preparation for both appeals, which were set down together for a single day’s hearing. No further allowance is required for preparation for the very limited costs appeal, let alone an allowance of a further 6 days’ preparation.

(b) Costs for the application seeking leave to adduce further evidence

• [12] During the proceedings, Mr Zheng applied for leave to adduce further evidence to prove that Mr Zheng had indeed discovered the “Principles of Separation” document, a fact disputed by Mr Deng. The application was opposed. It was heard at the same time as the substantive appeal. At the hearing, this Court directed counsel to seek to resolve the issue themselves, and to provide a memorandum to the Court confirming the position. Counsel for Mr Deng eventually acknowledged that the Principles of Separation document had been discovered electronically, and a memorandum was filed to that effect.^[7]
• [13] Mr Zheng claims costs under items 8 (commencement of application — 1 day) and 11 (preparation for hearing of application — 1.5 days) of sch 2 of the Rules in relation to the application for leave to adduce further evidence.
• [14] Mr Deng disputes those claims as this Court did not enter any judgment on the application, which was more of a submission than an application.
• [15] Mr Zheng argues that the purpose of the application was to show that the Principles of Separation document had in fact been discovered, and that was an issue of fact, not a submission. This Court did enter judgment on this application; it stated that: “[c]ounsel for Mr Deng now accept that the document was indeed discovered electronically”.^[8]
• [16] The High Court placed some emphasis on what it understood to be the failure by Mr Zheng to discover this document. In fact, multiple copies of the document had been discovered. The accuracy of the claim that the document had not been discovered should have been properly investigated before making that allegation before the High Court, and should have been thoroughly checked by counsel for Mr Deng when the issue was raised before this Court on appeal. The point was readily verifiable, and should not have been in dispute before this Court. It was reasonable for Mr Zheng to apply to adduce evidence to demonstrate that the document had been included in his discovery, and it was unreasonable to oppose the application. We therefore allow Mr Zheng’s claim for item 8 costs in relation to the commencement of this application. But we do not consider that any further allowance for preparing for the hearing of this application was required: there was adequate allowance for preparing for the hearing of this relatively simple and confined issue within the generous 6 day band B allowance.

Disputed disbursements

(a) Photocopying/printing expenses: $254.90

• [17] Mr Zheng claims disbursements totalling $254.90 for photocopying/printing expenses. Mr Deng disputes this claim as the amount is not verified by documentation and no paper copy of the case on appeal was required in this proceeding.
• [18] Mr Zheng submits that the amount is verified by an invoice to Mr Zheng from his lawyers, Advent Ark Lawyers, which is attached to an affidavit provided to this Court from Ms May Zheng (MZ Affidavit), dated 14 December 2020.
• [19] Mr Zheng was required to file one paper copy of the case on appeal under the Rules.^[9] We consider that the amount of the photocopying/printing cost is adequately verified by the invoice provided and is reasonable. We allow the claim for this disbursement.

(b) Postage expenses: $217.55

• [20] Mr Zheng claims disbursements totalling $217.55 for postage expenses. Mr Deng submits this amount is not verified by documentation: the only receipt is from New Zealand Post dated 4 June 2020, but it is not clear what that receipt is in relation to. Mr Zheng says that the amount is verified by figures in that receipt and also by his lawyer’s invoice.
• [21] This disbursement is adequately verified and is reasonable. It is allowed.

(c) Expenses incurred in preparation of a paper copy of the case on appeal: $7,776.20

• [22] Mr Zheng claims $7,431.20 in disbursements for the wages of two employees of Orient Construction Ltd (OCL) to perform almost a month’s work putting together the case on appeal. Mr Zheng also claims $345 for binding material costs for the case on appeal.
• [23] Mr Deng disputes those claims. He says this Court did not direct that any paper copies of the case on appeal be prepared, and claims that no paper case on appeal was filed with the Court or served on the respondents. The claimed sum of $7,776.20 does not break down how it was incurred or what work it represents. Wages for employees of OCL are not valid disbursements, and if they were, they are not reasonable disbursements. The binding material costs are not necessary to the appeal, so cannot be claimed.
• [24] Mr Zheng says that this Court did make a specific direction that a paper copy of the case on appeal be filed. There was no requirement to serve the case on appeal on the respondent and, in any case, whether a paper copy was served on the respondent is not relevant to whether a disbursement can be claimed. The case on appeal was clearly not minor — it contained 6,400 pages and further Microsoft Excel documents. A breakdown of the days spent by OCL employees putting together the case on appeal has been provided. The relationship between OCL and Mr Zheng is such that the expenses incurred by OCL are in effect incurred by Mr Zheng and are recoverable as disbursements. The binding material was used to prepare the case on appeal and so was a necessary expense.
• [25] Mr Zheng was required to prepare, and file with the Court, one paper copy of the case on appeal.^[10] He did so. Mr Zheng was not required to serve a paper copy on the respondents (though it was open to them to request one).^[11] The reasonable cost of printing and compiling the paper copy of the case on appeal is in principle recoverable as a disbursement.
• [26] The Rules allow 2 days of lawyer time to prepare the case on appeal for a band B case.^[12] That time allowance is intended to be sufficient to identify the documents for inclusion in the case on appeal and index them in the manner required by the Rules, with the necessary cross-references. In most cases today that will be done using electronic documents, in particular where an electronic bundle was used at trial. The electronic case on appeal should then be prepared in accordance with the requirements of the Senior Courts Civil Electronic Document Protocol 2019. This will generally involve scanning any paper documents, ensuring all PDFs are in searchable format, organising PDF files into the required folder structure, creating the electronic index, page numbering, and adding functioning hyperlinks. The cost of this task may be recoverable as a disbursement in circumstances where it is reasonable for the lawyer responsible for the appeal to contract this work out to a provider of such support services (for example, because the task requires expertise in working with electronic materials that is not available in the lawyer’s firm, or because of the scale of the exercise in a particular case). In many cases, however, this can be done by the lawyer or support staff within a firm without incurring any external costs, and this will come within the allowance for lawyer time.
• [27] Once the electronic case on appeal has been prepared, the paper copy should be able to be generated by printing the documents from the electronic case on appeal, compiling those documents into the paper copy volumes, adding tabs as required, and binding the volumes. The cost of doing this may be recoverable as a disbursement if the nature and scale of the task mean that it is reasonable for the lawyer responsible for the appeal to contract this work out to a provider of such support services.
• [28] In this case, the size of the paper copy case on appeal (some 6,400 pages) meant that it was reasonable for the work involved in its printing and compilation to be contracted out, and for the reasonable cost of this work to be recovered as a disbursement.
• [29] The parties did not provide any information about charges by providers of relevant services that we could use to benchmark the claimed time (almost a month) and cost ($7,431.20). It seems to us that the amount claimed is excessive: to put it in perspective, it assumes almost a day’s work to print off, compile and bind each of the (around 30) volumes of the case on appeal. A competent and experienced person compiling a paper copy of the case on appeal from the electronic case on appeal should be able to prepare at least 10 volumes in a day, probably more. So we would expect this task to take three days at most. Mr Zheng has not provided any information about the hourly rate for provision of such services by a person with relevant legal support service experience, but we consider it is reasonable to proceed on the basis it would be in the region of $40 per hour. On that basis, a reasonable allowance for the cost of preparing the paper copy case on appeal is $960.
• [30] It is possible that the work took longer in this case because a paper copy of the case on appeal was compiled before the electronic case on appeal was prepared, and the individuals who carried out the work did not have experience in preparing court materials. But an appellant cannot recover disbursements in excess of a reasonable amount for the efficient completion of the relevant task, even if the cost they actually incurred is substantially greater.
• [31] We allow $960 as a disbursement for compilation of the case on appeal. We also allow the claimed disbursement of $345 for binding material costs, which is a modest amount that appears reasonable.

(d) Cost of gown hire for senior counsel

• [32] Mr Zheng claims the cost of hire of two gowns for senior counsel. Mr Deng says that only the cost of one gown is recoverable, as this Court did not certify for second counsel.
• [33] We did not certify for two counsel. Disbursements associated with the appearance by second counsel for Mr Zheng are not therefore recoverable. We approve a disbursement for one gown only: $17.25.

Result

• [34] The claims for costs referred to at [3] above are determined as follows:

(a) The claim for costs items 15 and 17 in respect of the costs appeal is not allowed.

(b) The claim for costs in respect of the application for leave to adduce further evidence is allowed in respect of item 8, but not item 11: a total of 1 day.

• [35] The claims for disbursements referred to at [4] above are determined as follows:

(a) The claim for photocopying/printing expenses of $254.90 is allowed.

(b) The claim for postage expenses of $217.55 is allowed.

(c) The claim for expenses incurred in connection with preparation of the paper copy case on appeal is allowed to the extent of $960 plus binding material costs of $345: a total of $1,305.

(d) The claim for gown hire is allowed in respect of one gown: $17.25.

• [36] We make no order as to costs in respect of the application for determination of costs in this Court. Neither party was wholly successful. These are matters that should have been capable of being resolved between the parties (assisted by their lawyers) on a practical basis, without the need for a determination by the Court.

Solicitors:
Advent Ark Lawyers, Auckland for Applicants
McVeagh Fleming, Auckland for Respondents

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^[1] Zheng v Deng [2020] NZCA 614 [CA judgment].

^[2] At [135]–[140].

^[3] Zheng v Deng CA37/2020, 25 March 2021.

^[4] CA judgment, above n 1, at [139].

^[5] Referred to in Court of Appeal (Civil) Rules 2005, r 53H(2)(a)(i).

^[6] High Court Rules 2016, r 14.12(2) and (3).

^[7] CA judgment, above n 1, at [68].

^[8] At [68].

^[9] Electronic Document Practice Note 2019, r 4.

^[10] Electronic Document Practice Note, r 4.

^[11] Senior Courts Civil Electronic Document Protocol 2019, r 9.2.

^[12] Court of Appeal (Civil) Rules, sch 2, item 15.