GRIFFIN TRUST AG v GLOBAL OIL SERVICES LTD [2019] NZHC 3418

GRIFFIN TRUST AG v GLOBAL OIL SERVICES LTD [2019] NZHC 3418 [19 December 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2018-404-1194[2019] NZHC 3418BETWEEN GRIFFIN TRUST AGFirst PlaintiffANDREW BAKERSecond PlaintiffAND GLOBAL OIL SERVICES LIMITEDFirst DefendantZIEDONIS PERKUNSSecond DefendantANTONIA KYRIAKOUThird DefendantHARDIJA VAIVADEFourth DefendantHearing: On the papersCounsel: T P Mullins and J P Cundy for the PlaintiffsP W David QC and S E Wroe for the DefendantsJudgment: 19 December 2019COSTS JUDGMENT OF ASSOCIATE JUDGE BELLThis judgment is delivered by me on 19 December 2019 at 11:00 ampursuant to r 11.5 of the High Court Rules......................................................Registrar / Deputy RegistrarSolicitors / Counsel:Lee Salmon Long, AucklandWilson Harle, AucklandPaul David QC, AucklandS E Wroe, Barrister, Auckland[1] This proceeding started in June 2018. The plaintiffs filed a discontinuance inOctober 2018. The costs of the proceeding have not however been decided. Thedefendants filed a memorandum as to costs in January 2019. The plaintiffs filed amemorandum in response in March 2019 and the defendants in turn filed amemorandum in reply. Last week I was given the file to decide costs. I do not knowwhy the costs matter was not decided earlier and I do not speculate. Nevertheless, itis unsatisfactory that the costs question has languished. The parties must have beeninconvenienced. There are no excuses. On behalf of the court I apologise to the partiesfor the delay.What the case was about[2] As its name suggests, AS Latvijas Naftas Tranzits is a Latvian oil company. Itoperates an oil terminal and pipelines. It was established in the 1990s when the state-owned enterprise, Ventspils Nafta, was privatised. This case concerns a 37 per centshareholding in the company. The shares were to be held for four Latvians: MamertsVaivads, Uldis Pumpurs, Jans Blazevics and Aivars Lembergs. Worried aboutpotential instability in Latvia, they arranged for the shares to be held on their behalfoutside Latvia, including by a Liechtenstein trust and a New Zealand company, GlobalOil Services Ltd. The arrangements are not straightforward.[3] Disputes arose. The Vaivads family allege that the plaintiffs, who wereresponsible for the trust arrangements, did not act in the interests of the beneficiaries,but are allied with Ventbunkers, which holds most of the shares in AS Latvijas NaftasTranzits. The Vaivads have taken proceedings in the Latvian courts. The plaintiffs,on the other hand, a Liechtenstein trustee company and its director, say that theVaivads family has improperly taken control. Part of the dispute is about control ofthe New Zealand company, Global Oil Services Ltd. That may go to who has controlof the 37 per cent shareholding in AS Latvijas Naftas Tranzits.[4] Global Oil Services Ltd, the first defendant, was the legal owner of the sharesin AS Latvijas Naftas Tranzits, at least until differences arose. According to theplaintiffs, Global Oil Services Ltd held the shares as nominee/bare trustee for GriffinTrust AG under a declaration of trust of April 2003 and a second declaration ofFebruary 2012.[5] Griffin Trust AG, the first plaintiff, is a Liechtenstein trustee company.Mr Baker, the second plaintiff, also from Liechtenstein, is its director.1 From 2003 to2010, Griffin Trust AG was the trustee of the GOS Trust, which was established inSeptember 2003. Although the settlor is a company incorporated in the Turks andCaicos Islands, it is a Liechtenstein trust and was registered in the Liechtenstein publicregister of trusts. The GOS Trust was for the benefit of the four Latvian beneficiariesin paragraph [2] above.[6] In 2010, Griffin Trust AG closed the GOS Trust and had it taken off the publicregister. It says that notwithstanding deregistration of the trust, Global Oil ServicesLtd continued to hold the shares in AS Latvijas Naftas Tranzits on trust for it and itheld the beneficial interests on trust for the Latvian beneficiaries in equal shares.[7] Since 2012 the shareholders of Global Oil Services Ltd have been Salfotex Ltd,a Cypriot company associated with the Vaivads family with a 62.5 per centshareholding and SIA Zaksi, a Latvian company associated with Uldis Pumpurs witha 37.5 per cent shareholding. Mr Baker was sole director of Global Oil Services Ltdfrom 2003 to 2015.[8] Differences started in 2015. Ms Vaivade, the daughter of Mamerts Vaivads,was on the supervisory board of AS Latvijas Naftas Tranzits. She says that anopportunity to sell the shares of Global Oil Services Ltd came up. Uldis Pumpursagreed with the idea, but Mr Baker would not give them a power of attorney tonegotiate the sale. They lost confidence in him and resolved to remove him as director.New directors were appointed: the second, third and fourth defendants. Mr ZiedonisPerkums, with both Latvian and New Zealand citizenship, lives in Auckland, MsAntonia Kyriakou, a Cypriot, lives in Nicosia, and Ms Vaivade lives in Riga. Mr Bakerasked for the shares in AS Latvijas Naftas Tranzits to be transferred to Griffin TrustAG, relying on the second declaration of trust, but the new directors say that theyknow nothing of this trusteeship and refused to transfer the shares. They say that,1 Formerly an English solicitor.notwithstanding that, Mr Baker managed to have Griffin Trust AG recorded as ashareholder of AS Latvijas Naftas Tranzits in place of Global Oil Services Ltd. Theydo not accept that the transfer was valid under Latvian law. Global Oil Services Ltdhas brought proceedings in Latvia challenging the change of shareholding. Mr Bakeris now on the supervisory board of AS Latvijas Naftas Tranzits. Ms Vaivade says thatwould be possible only with the co-operation of Ventbunkers. Ms Vaivade says thather family is acting in the interests of all four Latvian beneficiaries, but that is incontention.The proceeding[9] In this proceeding Mr Baker alleged that his removal as director of Global OilServices was invalid and sought reinstatement. Griffin Trust AG sued Global OilServices Ltd for breach of trust for refusing to transfer the AS Latvijas Naftas Tranzitsshares to it and sought a declaration that a power of attorney to Ms Vaivade to actgenerally on behalf of the company was invalid. It also sued the three new directorsfor knowingly assisting breaches of trust by Global.[10] The plaintiffs did not seek leave to serve the proceeding outside New Zealand,relying instead on the gateways under r 6.27(2)(b), (d), (f) and (h)(i) of the High CourtRules 2016. In response the second, third and fourth defendants filed an appearanceunder protest to jurisdiction and applied to dismiss the proceeding on forum nonconveniens grounds and for absence of a reasonably arguable first cause of action.Global Oil Services Ltd was also a party to the appearance, saying that it abided thecourt's decision on the dismissal application.[11] The application was to be heard on 19 November 2018. The plaintiffs soughtan adjournment, saying that they wished to amend their pleading and to add otherparties. Edward J declined the adjournment application and gave fresh timetablingdirections. On the day before they were to file their notice of opposition and affidavits,the plaintiffs discontinued.The parties' positions on costs[12] The plaintiffs accept that the defendants should have costs on thediscontinuance. They do not suggest that the court should order otherwise underr 15.23 of the High Court Rules 2016. The parties are, however, far apart on theamount. Initially the plaintiffs offered $4,514.00 under category 2 band B for all steps,plus disbursements. They later changed that to $8,474.00, the only change being toallow band C for filing the interlocutory application. The plaintiffs said that theyshould pay these disbursements:Filing fee on appearance $110.00Filing fee on interlocutory application $500.00Fee for translator and Notary €96.80International couriers €290.56[13] The defendants filed an affidavit by an expert on Latvian law. The plaintiffsobject that his fee of €14,237.75 is too high.[14] On the other hand, the defendants seek indemnity costs of $97,073.85. Failingthat, they seek increased costs and, failing that, scale costs under category 3. Theyalso seek full recovery of the fee of the Latvian expert.Scale costs[15] Under r 14.3(1) of the High Court Rules, this is a category 3 proceeding. Thecase was undoubtedly significant. A judgment would determine who had control ofGlobal Oil Services Limited. Its shareholding in AS Latvijas Naftas Tranzits wasvaluable. In a proceeding in Latvia at the behest of the Vaivads against Ventbunkersthe shareholding was claimed to be worth €26,288,000.[16] The proceeding was complex. While the plaintiffs' causes of action wereunremarkable in this court, the case would deal with the laws of Latvia andLiechtenstein. While Liechtenstein has a law of trusts (unlike most Europeanjurisdictions), it is different from the law of trusts originally developed in the Court ofChancery. As an example, the court would need to ascertain the effect on Global OilServices Limited of the closure of the GOS Trust. Liechtenstein and Latvia have civillegal systems. While lawyers trained in the common law tradition can readilyunderstand the substantive laws of other common law jurisdictions, understanding thelaws of civil legal systems is much more challenging. While both common law andcivil law systems may reach roughly similar results, the substantive principles andprocedural rules are quite different.[17] In New Zealand terms the trust structures set up for the shares in AS LatvijasNaftas Tranzits to be held by Global Oil Services Limited on trust for GriffinTrust AG, itself a trustee, was relatively complex. How they operated in aninternational context was not straight-forward.[18] There is also the matter of language differences. Some of the deponents havegiven their evidence in Latvian.[19] The plaintiffs accept that the defendants took these steps in the proceedingStep no. Description of what was done8 Notice of appearance with protest of jurisdiction22 Filing, interlocutory application to dismiss11 Filing, memorandum for mention on 31 August 201812 Appearance at mention on 31 August 201811 Memorandum for mention on 18 October 201812 Appearance at mention on 18 October 2018[20] The defendants have claimed for these other steps:Step no. Description of what was done2 Commencement of defence (2 days)30/37 By analogy allowance for affidavits (4 days)11 Considering memorandum but not filed (.2 of a day)[21] The defendants' claims for commencement of defence and for work onaffidavits are not expressly allowed, when no statement of defence was filed and theplaintiffs discontinued without filing opposition to the dismissal application. Theseclaims are therefore extras and will be considered as a claim for increased costs underr 14.6. I consider that below.[22] I do not allow for the extra step 11. The document was not filed in court. It isnot customary to allow for steps that do not result in a document being filed in court.[23] I allow band C for both the notice of appearance and filing the interlocutoryapplication. The plaintiffs propose band B for filing the notice of appearance. Whilethe appearance is a relatively short document, I accept that on the defendants' sidethere was considerable preparation for the challenge to jurisdiction that goes farbeyond drafting the document. The defendants were foreign and English was not theirfirst language. Considerable time was required to take instructions and give advice onchallenging the jurisdiction.[24] I calculate scale costs as follows:No. ofstepDescription of step in theproceedingCategory timebandNo. ofdaysCosts8 Notice of appearance with protestto jurisdictionC 2 days $6,600.0022 Filing interlocutory application C 2 days $6,600.0011 Appearance at mention on 31August 2018B .2 day $660.0011 Memorandum for mention on 18October 2018B .4 day $1,320.0012 Appearance at mention on 18October 2018B .2 day $660.004.8 days $15,840.00Increased costs under r 14.6[25] Under r 14.6(3) the court may order a party to pay increased costs if the natureof the proceeding or a step in it is such that the time required by the party claimingcosts would substantially exceed the time allocated under band C. Here I deal withthe claims for commencing the defence and preparing affidavits.[26] The defendants have not put their lawyers' time records before the court toshow the time spent on these steps, but I readily accept that the time spent must havebeen much more than has been claimed. Considerable time must have been requiredto get to grips with the facts of the case, the laws of three jurisdictions, two of themcivil law, and establishing how they related to each other. Obtaining the information,analysing it and working out a strategy to respond were not straightforward.[27] It is proper to allow for preparation of the defence, even though no statementof defence was filed. After all, if forum non conveniens is to be properly argued, thecourt needs to know what will be in issue.2 The defendants clearly prepared on thesubstantive issues.[28] The affidavit preparation was significant. None of the defendants' deponentswere in New Zealand. Mr Perkuns swore his affidavit in Australia, Ms Kyriakouswore hers in Cypress, and Ms Vaivade swore hers in Riga. Mr Vaivads normally livesin Austria but swore his in Riga. He swore his affidavit in Latvian. It had to betranslated. The defendants also obtained an affidavit as to Latvian law by a Latvianlawyer. His affidavit relevantly addresses forum non conveniens issues and whetherthe courts of Latvia are an alternative forum for this proceeding. He could not haveprepared that affidavit without being carefully briefed on the New Zealand proceeding.Given the difference in the time zones, someone must have worked late at night, andI suspect that was in New Zealand.[29] The plaintiffs are properly entitled to the extra six days they have claimed:$19,800.Increased costs for enforcement[30] The plaintiffs are based in Liechtenstein and are not known to have any placeof business or assets in New Zealand. It is unlikely that any New Zealand costs ordercan be enforced against them anywhere except in Liechtenstein. There is no assurancethat the courts of Liechtenstein would apply common law principles for the2 Turn and Wave Ltd v Northstar Accounts Pty Ltd HC Auckland CIV-2010-404-2268, 23 December2010 at [82]; Haines v Herd [2015] NZHC 3365 at [49].recognition of foreign costs orders.3 Enforcing the costs order against the plaintiffs inLiechtenstein is not likely to be straight-forward or easy. All going well for them, thedefendants may recover their costs incurred in instructing Liechtenstein lawyers. Thatwill be a matter of Liechtenstein law. But their New Zealand lawyers will need toinstruct Liechtenstein lawyers on enforcing the order. That may include having theorder translated into German and advising the Liechtenstein lawyers on the effects ofthe order under New Zealand law.[31] The question here is whether the defendants can recover their New Zealandcosts of enforcement. If the defendants could enforce the orders in New Zealand, theycould recover costs under the High Court scale.4 Enforcing overseas is more difficultand time-consuming. By analogy under rr 1.6 and 14.5(1) of the High Court Rules,the defendants should have an allowance for the costs of their New Zealand lawyersin taking steps to enforce the costs order in Liechtenstein. I fix that amount at twodays, $6,600, under r 14.6(3)(d). That will be payable only if the plaintiffs do not paythe order for costs by 28 February 2020.Indemnity costs[32] The defendants seek indemnity costs under r 14.6(4)(a) claiming the plaintiffsacted vexatiously, frivolously, improperly or unnecessarily in commencing theproceeding. The thrust of their submission is that the proceeding was misconceivedfrom the outset. The proceeding was unnecessary because the plaintiffs did not consultwith the beneficiaries before starting. The explanation given by the plaintiffs fordiscontinuing does not stand up. The proceeding was designed to thwart the legitimatesteps taken by the defendants in suing in Latvia to uphold the interests of all thebeneficiaries.[33] To accept that submission requires me to come to a view on the ultimate meritsof the case. I am unable to do so. There are pointers going both ways. It is not clearthat the Latvian proceedings were for the benefit of all the beneficiaries. Two of them,3 For example, the principle that the plaintiffs have submitted to the jurisdiction of the New Zealandcourts by suing here.4 See High Court Rules Schedule 3 for the time allocations for liquidation, bankruptcy proceedingsand judgment enforcement (steps 59-62).Mr Pumpurs and Mr Blazevics, say they supported the plaintiffs' proceeding. Theplaintiffs' proceeding was directed at obtaining determinations in respect of a NewZealand company. New Zealand is more often than not the appropriate forum in whichto decide questions about New Zealand companies. The defendants, as directors of acompany incorporated under the New Zealand Companies Act 1993, can be taken toaccept that the laws of New Zealand should apply to them as directors.5 While thedefendants had arguments that Latvia was the appropriate forum, I cannot say thatsuing in New Zealand was vexatious or improper.[34] Indemnity costs under r 14.6(4)(a) are not the norm. This case is not so seriousthat the plaintiffs should be condemned for starting this proceeding in New Zealand.The application for indemnity costs fails.Costs on the costs application[35] This is an appropriate case for the defendants to have costs on the costsapplication, but I am sympathetic to the plaintiffs' complaint that the defendantsoverdid it with not only a very full memorandum and extensive supporting schedules,but also affidavits. In the circumstances, I allow .4 of a day under category C forpreparing the costs application - $1,320.Disbursements[36] The plaintiffs accept all the disbursements claimed by the defendants, exceptthe expert's fee, €14,237.75. I am satisfied with the expert's fee. While his affidavitis ten pages long, it was carefully prepared. When considered in the light of expertevidence on foreign law I have read recently, it is among the better affidavits. I see noreason to regard the fee as unreasonable or to discount it. It was important evidencefor the challenge to jurisdiction.[37] The plaintiffs have converted all their disbursements into New Zealand dollars:$26,370.18.5 Grant v Pandey [2013] NZHC 2844 at [17].Summary[38] I fix costs payable on the discontinuance:Scale costs $15,840Increased costs $19,800Costs on costs application $1,320Sealing order $660Sub-total $37,620Disbursements $26,370.18Total $63,990.18Those costs are payable from the date of this decision. If the costs are not paid in fullby 28 February 2020, a further sum of $6,600 will be payable as increased costs forenforcement.__________________________Associate Judge R M Bell