Shanghai Neuhof Trade Company Ltd v Zespri International Ltd

• Jurisdiction: New Zealand
• Judge: Wylie J
• Judgment Date: 13 May 2020
• Neutral Citation: [2020] NZHC 987
• Court: High Court
• Docket Number: CIV-2014-404-001316
• Date: 13 May 2020

Between

Shanghai Neuhof Trade Company Limited

First Plaintiff/First Counterclaim Defendant

Shanghai Hui Zhan Logistic Limited

Second Plaintiff/Second Counterclaim Defendant

and

Zespri International Limited

Defendant/Counterclaim Plaintiff

[2020] NZHC 987

Wylie J

CIV-2014-404-001316

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

Civil Procedure — application for disclosure in relation to an application for costs — the respondent sought an order requiring the plaintiff to disclose the identity of their non-party litigation funders and an order requiring the plaintiffs solicitors and counsel to list the metadata embedded in emails they received or sent to the litigation funders — High Court Rules 2016

Appearances:

B Gray QC and K Muller for Plaintiffs/Counterclaim Defendants

S Barker and L Sizer for Defendant/Counterclaim Plaintiff

JUDGMENT OF Wylie J

This judgment was delivered by Justice Wylie On 13 May 2020 at 4.00 pm Pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Introduction

1 The plaintiffs have discontinued their claims against the defendant and the defendant has discontinued its counterclaim against the plaintiffs. The defendant is now entitled to costs but, before seeking a costs order, it has applied for disclosure orders. It seeks to require the plaintiffs to disclose the identity of their non-party litigation funders, particulars of the relationship between them and their funders, any agreements with or undertakings given by them to the funders, and any documents relevant to the funders' control of or interest in the proceedings.

2 The plaintiffs in response have filed two affidavits from Ms Yayin Li. She is the general manager of the second plaintiff. Ms Li has deposed that:

• (a) the proceedings were funded by members of Xiongjie Liu's (Mr Liu's) immediate family because Mr Liu is in prison in China and was unable to fund the litigation himself; 1

• (b) there were no written agreements put in place, because, in Chinese culture, written agreements are unnecessary and would be inappropriate for a matter such as this;

• (c) instructions for the conduct of the proceedings were given by members of the family. This was necessary because Mr Liu was in prison at all relevant times. The family however always regarded Mr Liu as being in control of the litigation and as “being the shareholder of the plaintiffs in whose interests the litigation was conducted”; 2

• (d) the source of the funding was an inheritance received following the death of Mr Liu's father, Dongcai Liu;

• (e) payments made to persons or entities in New Zealand were passed on on behalf of the family by a family member who lives in this country, Mr Lijun Si. Mr Si did not use his own funds. He was not involved in the funding of the litigation, he did not control the litigation and he did not stand to benefit from it.

3 Notwithstanding the provision of this information, the defendant still seeks disclosure orders. Further, it seeks to extend the scope of the information sought to also require details of the late Dongcai Liu's will (or any legacy from the estate), as well as trust deeds for any trusts that funded the litigation, and any resolutions of the trustees of those trusts authorising distributions to fund the litigation. The defendant has also modified one of its requests. It initially sought any documents relevant to the issue of the funders' control of or interest in the proceeding, including any instructions given by the funders to the plaintiffs' solicitors or counsel, and any documents relevant to the funders' understanding of their liability for costs. It now seeks that the Court should require the plaintiffs' solicitors and counsel to list in affidavits the metadata embedded in emails they received from or sent to the litigation funders. Mr Barker, for the defendant, explained that the defendant does not seek the disclosure of privileged information. Rather, it seeks the metadata which, I was told, will disclose the date, author and recipient(s) of relevant emails.

Background

4 The plaintiffs are both Chinese companies. The first plaintiff imported and distributed kiwifruit in China on behalf of the defendant. The second plaintiff built a cool store for the defendant.

5 The Chinese customs authorities alleged that duty had been underpaid on the imported kiwifruit coming into China, and the first plaintiff and its managing director, Mr Liu, were charged. They were found guilty. The Shanghai No. 1 Intermediate Peoples' Court imposed a fine of RMB 40,000,000 3 on the first plaintiff. Mr Liu was sentenced to 13 years' imprisonment. Mr Liu for his part claimed at trial that he was the defendant's agent, that the defendant consigned the kiwifruit to the first plaintiff,

retained ownership of the kiwifruit and was liable to pay the duty to the Chinese customs authorities

6 The Serious Fraud Office announced that it was investigating the affairs of Zespri Group Limited (of which the defendant is part) in late October 2013. Three days later Mr Si, who is Mr Liu's nephew, gave an interview to TVNZ One News in this country. He asserted in the course of the interview that the defendant had treated his uncle as a “scapegoat”. One News also reported that Mr Liu's family were considering legal action in this country against the defendant.

7 On 20 November 2013, a letter before action was sent by the plaintiffs' then counsel to the defendant, reserving the rights of the first plaintiff, Mr Liu and “each member of his family” against the defendant.

8 The plaintiffs commenced the proceedings on 30 May 2014. They sued on a primary contract they alleged was in place between them and the defendant between 2007 and 2011. They alleged that the defendant breached the contract by failing to reimburse them for duty paid by them to the customs authorities in China. They sought reimbursement of that duty. They also sued on a secondary contract. They asserted that the defendant asked them to build a cool store for its use in Shanghai and agreed that it would purchase from them cool storage and services in respect of a specified number of trays of kiwifruit each year. They asserted that when the primary contract for the export/importation of kiwifruit was terminated in 2011, the defendant also breached the secondary contract.

9 The defendant has referred to various actions which it attributes to Mr Si in this country:

• (a) On 4 June 2014, a publication known as FreshFruitPortal published a report on the Court proceedings. The article recorded statements attributed to Mr Si detailing some of the alleged facts asserted by the plaintiffs. Mr Si used the pronoun “we” in this context.

• (b) FreshFruitPortal published a further article on 6 June 2014. Mr Si was again attributed with comments on various factual matters raised by the proceedings.

• (c) In an affidavit of documents filed in July 2014, privilege was claimed in respect of emails sent by Mr Si, including to the plaintiffs' then counsel.

• (d) In August 2014, the plaintiffs served an affidavit on the defendant sworn by a translator. The affidavit stated that the translator had been provided with a number of the original documents for the proceeding by Mr Si.

10 In August 2015, the defendant's counsel asked the plaintiffs' then counsel to disclose any litigation funding agreements as part of discovery. The plaintiffs' counsel advised that there was “no outside litigation funder” financing the case. The defendant's counsel asked what was meant by outside litigation funding. There was no response to this question.

11 Mr Si and his mother (Mr Liu's sister - Weixin Li), attended a without prejudice meeting with the plaintiffs' counsel in late 2018. A representative of the defendant who attended the meeting has deposed that they were representing the plaintiffs.

12 In December 2018, the defendant's counsel again asked the plaintiffs to advise if they had any litigation funding. The plaintiffs responded in January 2019 advising that the plaintiffs were being funded “by members of the family including trusts associated with them”.

13 In the interim, the first plaintiff had failed to pay the fine levied against it and failed to publish annual reports in China. It had been added to a list of enterprises “with serious illegal acts” and with “abnormal operations”. In February 2019, its business licence to trade in China was revoked.

14 The trial of the proceeding was initially set down to commence in July 2019. The plaintiffs however advised by memorandum that Mr Liu would be unavailable to give evidence (he was still in custody in China) and they applied to adjourn the trial sine die on this basis. I granted the application for an adjournment and adjourned the trial to 27 April 2020. In November 2019, the plaintiffs again applied to adjourn the trial to a date after 27 February 2021, again because Mr Liu was still in prison. I declined the adjournment application in December 2019 and, in January 2020, the plaintiffs discontinued their claims against the defendant.

15 On 6 February 2020, Mr Si confirmed to a media outlet, Business Desk, that the plaintiffs had discontinued the proceeding.

16 The defendant's application for disclosure orders was filed in February 2020. The plaintiffs have not filed a notice of opposition. Rather, they assert that the affidavits filed by Yayin Li, both in March 2020 and noted above in [2], respond to the defendant's application and give all information that the defendant is entitled to.

The defendant's position as to costs

17 Ms Evans, who is general counsel for the defendant, has filed an affidavit deposing that the defendant's legal fees have been in excess of $2 million, and that its disbursements exceed $550,000. Ms Evans states that she is still in the process of collating some expenses; she...