NEW ZEALAND STEEL LIMITED v MINISTER OF COMMERCE AND CONSUMER AFFAIRS [2018] NZHC 3133

NEW ZEALAND STEEL LIMITED v MINISTER OF COMMERCE AND CONSUMER AFFAIRS [2018]NZHC 3133 [30 November 2018]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV 2017-485-714[2018] NZHC 3133BETWEEN NEW ZEALAND STEEL LIMITEDPlaintiffAND MINISTER OF COMMERCE ANDCONSUMER AFFAIRSDefendantOn the papersJudgment: 30 November 2018JUDGMENT OF MALLON J(Costs)Introduction[1] The applicant (NZ Steel) sought judicial review of a determination made bythe respondent (the Minister) under the Dumping and Countervailing Duties Act 1988.The determination was that Chinese galvanised steel coil manufactured in China andexported to New Zealand was being subsidised to de minimis levels only and thereforenot causing material injury to the domestic industry here. I found in favour of NZSteel and quashed the Minister's decision.1[2] I indicated a preliminary view that costs should be ordered in NZ Steel's favouron a category 3B basis.2 The parties have agreed to this and to the calculation of thosecosts. The sole issue is whether NZ Steel's disbursements for experts' fees are fullyrecoverable. These fees total $119,723.04 and are made up as follows:1 New Zealand Steel Limited v Minister of Commerce and Consumer Affairs [2018] NZHC 2454.2 At [259].(a) Mr Gospage (evidence on the international law and practice of traderemedies and subsidy investigations): $82,705.97;(b) Professor Lardy (evidence on the role of the state in Chinese political-economy): $35,642.07; and(c) Dr Scholz (evidence about the galvanised steel coil and the Minister's"like goods" determination): $1,375.00.[3] The respondent says these disbursements are not recoverable because theywere not reasonably necessary for the conduct of the proceedings and because theyare not reasonable in amount.The High Court Rules[4] The recoverability of disbursements in legal proceedings is governed byr 14.12 of the High Court Rules 2016. It provides:14.12 Disbursements(1) In this rule,—disbursement, in relation to a proceeding,—(a) means an expense paid or incurred for the purposes of theproceeding that would ordinarily be charged for separatelyfrom 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 theproceeding:(iii) expenses of photocopying documents required bythese rules or by a direction of the court:(iv) expenses of conducting a conference by telephone orvideo link; but(c) does not include counsel's fee.relevant issue, in relation to a disbursement, means the issue in respectof which the disbursement was paid or incurred.(2) A disbursement must, if claimed and verified, be included in the costsawarded for a proceeding to the extent that it is—(a) of a class that is either—(i) approved by the court for the purposes of theproceeding; or(ii) specified in paragraph (b) of subclause (1); and(b) specific to the conduct of the proceeding; and(c) reasonably necessary for the conduct of the proceeding; and(d) reasonable in amount.(3) Despite subclause (2), a disbursement may be disallowed or reducedif it is disproportionate in the circumstances of the proceeding.[5] Expert fees are a disbursement in the sense that they are an expense paid orincurred for the purposes of the proceeding that would ordinarily be charged forseparately from legal professional services in a solicitor's bill of costs.3 However,since they are not listed in the non-exhaustive list of specified recoverabledisbursements at r 14.12(1)(b), they must be approved by the court underr 14.12(2)(a)(i). In order to be approved they must be "specific to" and "reasonablynecessary for" the conduct of the proceeding, and reasonable in amount.Reasonably necessary[6] The first issue is whether the expert fees in this case were reasonable necessaryfor the conduct of the proceeding. The respondent says they were not because judicialreview proceeds on the evidence that was before the decision-maker, none of theexpert evidence adduced on the judicial review application was before the decision-maker and this was reflected in my view of that evidence.[7] My judgment commented on the evidence of Professor Lardy and Mr Gospagein this way:[230] NZ Steel has provided an affidavit from Professor Nicholas Lardy, aneconomics expert with particular expertise in China. He has written eight3 McGechan on Procedure (online looseleaf ed, Thomson Reuters NZ) at [HR14.12.01].books on the Chinese economy and has contributed to the chapters of manymore books. He discusses evidence that suggests there is large-scalesubsidisation of certain industries in China, including the steel industry. Hediscusses why that is. He discusses the unprofitability of enterprises such asthose supplied hot rolled and cold rolled coil and says the GOC is "providingindirect subsidies through the state-dominated system that allows these firmsto sell products at less than the cost of production, seemingly year after year"which is a program that allows these producers to sell inputs at LTAR.[231] The information from Professor Lardy or the books he refers to maycertainly have assisted MBIE. However it is like the verification visits. MBIEwas not required to carry out its investigation in any particular way. It wasrequired to adopt a robust and fair investigation aimed at arriving at adetermination based on reliable facts but the manner in which it did so wasopen to MBIE. If NZ Steel wanted MBIE to take into account ProfessorLardy's evidence, it should have submitted that evidence during MBIE'sinvestigation. There is no error per se in MBIE not sourcing this kind ofevidence of its own volition. It is more illustrative of the kind of evidenceMBIE could resort to when faced with limited cooperation from the GOC andChinese producers.[232] NZ Steel also filed a detailed affidavit from Stephen Gospage. He hasextensive EC experience, specialising in subsidy and countervailing dutyissues as an investigator; as the EU's representative on the WTO committeesand informal expert groups; and in EC policy work amongst other things. Hisaffidavit critiques MBIE's analysis, its failure to carry out a verification visitof Zong Cheng at least (as the sole cooperating producer) and its discountingof the findings of international investigations (in particular the two ECreports). This is the sort of evidence that NZ Steel might have put forward toMBIE before its investigation was completed. Although the time frame mayhave been tight, it might have put at least some of Mr Gospage's expertcomments forward in response to the Essential Facts and Conclusion Report.Or it might have put it forward following the Provisional Measures Report tobolster the submissions it made on that report which were to similar effect asMr Gospage's evidence.[233] Other than to consider what other secondary sources might have beenavailable to MBIE, I have not taken into account the evidence of ProfessorLardy and Mr Gospage. It is not appropriate to allow material which was notbefore the decision maker, largely brought into existence after the impugneddecision was made, and to do so essentially for the purpose of casting doubton the substantive unreasonableness of the decision. There is also the issuethat Mr Gospage's evidence is largely a discussion of the overseas decisionswhich the Court is able to review for itself. That discussion would have alsoneeded to have met the "substantially helpful" test for admission of expertopinion evidence.[8] The evidence of Dr Scholz was dealt with in the following way:[250] As MBIE submits, Dr Scholz's evidence was not before MBIE whenit gave its decision. NZ Steel could have put this evidence before MBIE duringits investigation. Other parties would then have had an opportunity tocomment on it. They might, for example, have been able to comment on thecomparative costs of importing and cutting down wide steel versus the costsof importing narrow steel. They might also have been able to challenge thedegree of substitutability by empirical data about the extent to which thisoccurs.[251] A judicial review must focus on the information that was before thedecision maker. This affidavit does not meet the test for admission because:it could have been obtained and put before MBIE with reasonable diligence;it does not go to whether MBIE's advice was wrong about the existence ofsubsidies; and MBIE has not had the opportunity to test the information aspart of its investigation.[252] That said, Dr Scholz's evidence will be relevant if there is areinvestigation or a further investigation. On its face that evidence provides astrong challenge to the views reached by MBIE. Those views were based onassumptions about the extent of substitutability and connectivity which do notappear to have taken into account the kind of matters Dr Scholz has referredto. The determination of the relevant subject goods may need reconsiderationin light of this evidence and any other evidence obtained in that furtherinvestigation.[9] These views about the expert fees do not preclude their recovery. The questionis whether they were reasonably necessary for the conduct of the proceeding, notwhether I relied on them in forming my views. Clearly irrelevant expert evidence isnot reasonably necessary.4 However, if it is reasonable to engage an expert for theconduct of the proceeding, the expert fee is recoverable even though ultimately it maynot have assisted the Court.5[10] In this case a key submission for NZ Steel was whether, in light of the limitedand unverified information MBIE had obtained from the Chinese Government and theChinese producers of galvanised steel, MBIE was required to do more by way ofinvestigation in order to properly inform the Minister of the relevant considerations.The evidence of Professor Lardy and Mr Gospage were directly relevant to thissubmission. It was NZ Steel's view that it was incumbent on the Minister, throughMBIE, to source other relevant and reliable information from secondary sourcesbecause of the non-cooperation from the primary sources.[11] I accepted that there were a range of ways MBIE might have investigated thematter in light of the limited cooperation from the Chinese Government and theChinese producers. I accepted Professor Lardy and Mr Gospage's evidence was the4 See, for example, Haricot Investments Ltd v Maerewhenua District Water Resource Company Ltd[2015] NZHC 518 at [48]-[49].5 Air New Zealand Ltd v Commerce Commission (2005) 17 PRNZ 786 at [74]-[76].kind of information potentially available to the Minister. In this sense their evidencewas relevant.[12] I also accepted the Minister was not properly informed about the relevance ofoverseas investigations as a legitimate source of reliable information. The reports ofthose investigations are detailed and lengthy. Presenting them in a way that makesthem digestible to someone not familiar with them is not straight forward. Theapplicant spent a substantial part of the hearing discussing them. I have no doubt thatMr Gospage's expertise on overseas investigations assisted the applicant in this.6 Eventhen, I asked the parties to prepare a summary of each of the decisions, which theydid. Although that provided a helpful introduction to them, I then personally spentmany hours after this reviewing the decisions in order to get a clear understanding ofthem. In these circumstances I accept that it was reasonably necessary for the conductof the proceedings for NZ Steel to engage Mr Gospage.[13] Similarly, Dr Scholz's evidence was directly relevant to NZ Steel's submissionthat MBIE erred in limiting the description of the goods to a width of 1260 mm.Dr Scholz's evidence provided a strong challenge to MBIE's views on this issue. Iconsidered that the relevant subject goods might need reconsideration in light of thisevidence. NZ Steel should have put this evidence before MBIE during theinvestigation if it wanted to ensure the points Dr Scholz made were before the Minister.Nevertheless, I accept it was reasonably necessary for the conduct of the proceedingsto assist in explaining NZ Steel's view as to the flaws in MBIE's consideration of thescope of the subject goods.[14] I therefore accept that it was reasonably necessary for NZ Steel to engage allthree experts for the conduct of the proceeding. Having said that, to some degreeMr Gospage's affidavit evidence was directed to criticising MBIE's conclusions. Forexample, it includes the following:In the absence of cooperation from the GOC and the exporters, the weight ofevidence in my view points clearly to a conclusion that SOEs supplying HRSand CRS are public bodies. MBIE's negative conclusion is based largely onthe premise that public bodies must have the ability to control third parties,6 Air New Zealand Ltd v Commerce Commission [2007] NZCA 27, [2007] 2 NZLR 494 at [62].which, as discussed above, is no longer valid. The correct view, in myopinion[15] Similarly, Professor Lardy's affidavit addressed two topics: (1) the role ofsubsidies in the Chinese economy; and (2) comments on related findings in MBIE'sFinal Report. The second of these directly challenges MBIE's findings.[16] This kind of evidence is not relevant in a judicial review. For that reason I didnot consider it. Because, to some extent, the evidence went beyond its proper scopein my view it is not appropriate to allow full recovery for it. However, recognisingthat the evidence likely assisted counsel for NZ Steel to frame its submissions, thereduction in recovery should be modest. That is because the incremental work informally preparing the evidence, over and above providing assistance to NZ Steel, isnot likely to have been great.[17] Taking a pragmatic and broad-brush approach, I consider the recovery ofProfessor Lardy and Mr Gospage's fees should be reduced by 25 per cent. This isbecause roughly half of their expert evidence went beyond its proper scope. Of thathalf, I allow half of that (25 per cent) to be recovered to recognise it was still ofassistance to NZ Steel and reasonably necessary to that extent. On this basis 75 percent of the fees were reasonably necessary.Reasonable in amount[18] The respondent submits NZ Steel has not discharged its onus on the balance ofprobabilities that the expert fees were reasonable in amount. The respondent says NZSteel provided only limited information and did not follow the approach suggested inAuckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd which,amongst other things, suggested a supporting affidavit from an independent expertpractising in the same field may be necessary.7 The respondent says Mr Gospage'shourly rate of £200 has not been explained or justified and the narration on the invoicesfor Mr Gospage and Professor Lardy is inadequate.7 Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd [2015] NZHC 470 at[44].[19] An affidavit from an independent expert to support the claimed disbursementsas reasonable in amount was a suggested approach when the quantum claimed wassignificant. It was made in the context of a claim for over $800,000 for expertwitnesses' costs, where there were a wide range of experts (planners, environmentalscientists, engineers, soil scientists or hydrogeologists), and the judge did not have thebenefit of hearing from them because the issue of quantum was settled early in thecourse of the trial.8 Even then, the Judge, in the absence of such an affidavit,proceeded to assess the reasonableness of the amount taking a pragmatic approach.9[20] The present context is different. The total expert fees claimed is considerablyless, the nature of the evidence is in, or is analogous to, fields that are not infrequentlybefore this court and I am fully apprised of the nature of their evidence.10[21] In this case NZ Steel has provided the following invoices:(a) Invoice No 0145 (dated 19 March 2018): £37,600 for preparation of anexpert report in relation to the proceedings by Mr Gospage assisted byCliff Stevenson for 188 hours of work undertaken at £200 per hour.(b) Invoice No 0146 (dated 6 April 2018): £3,704 for preparation of anexpert report in relation to the proceeding by Mr Gospage assisted byCliff Stevenson for 18.25 hours of work undertaken at £200 per hourtogether with £54 for the cost of a notary in Brussels.(c) Invoice No 0157 (dated 8 May 2018): £1,000 for preparation of anexpert report in relation to the proceeding by Mr Gospage assisted byCliff Stevenson for five hours of work undertaken at £200 per hour(d) Invoice from Professor Lardy (dated 13 March 2018): US$24,500,comprised of US$22,000 for "[a]nalytical Report on the role ofsubsidies in the Chinese economy" and US$2,500 for "[c]omments onMBIE Final Report on Galvanised Steel from China".8 At [30], [43] and [49].9 At [53].10 See, for example, Kim v Minister of Justice [2016] NZHC 3086 where an expert fee from an experton the Chinese criminal justice system was allowed as a disbursement.(e) Invoice from Dr Scholz (dated 15 April 2018): $1,581.25 for"[c]onsulting hours of Dr Wolfgang Scholz" for 5.5 hours of work at$250 per hour.[22] I have no basis for concluding that these amounts are unreasonable for the workinvolved. Mr Gospage is not a solicitor, but he has considerable experience in theEuropean Commission and WTO decisions in this area. The combined hourly rate forMr Gospage and his assistant appears to be reasonable by comparison with the usualhourly rates of experienced commercial lawyers in this country. The hours involvedseems high, but the decisions he discusses are detailed and lengthy and I have no basisfor saying that the time involved was unreasonable.11 Professor Lardy's fee does notappear to be out of line with fees charged by other experts in important litigation beforethe Court. He has considerable expertise in the Chinese economy through theacademic positions he has held and his research and writing in the area. Dr Scholz'shourly rate and the hours involved again seems to be entirely reasonable and are notdirectly challenged by the respondent.[23] The respondent says the disbursements claimed are disproportionate in thecircumstances of the proceeding. I do not agree. This was important and complexlitigation as the costs category 3B reflects. No further reduction is appropriate beyondthe one I have discussed at [17] above. Moreover, that reduction arguably is too greatfor Professor Lardy's affidavit evidence given his own breakdown of the time he spenton each of the two matters he covered. In this respect, the respondent has been giventhe benefit of the broad-brush approach I have taken recognising that NZ Steel bearsthe onus.Result[24] The respondent is to pay the applicant the sum of $90,136.03 for expert fees inaddition to the costs and other disbursements that have been agreed.Mallon J11 Air New Zealand Ltd v Commerce Commission, above n 5 at [76].