ABC Developments Learning Centres (NZ) Limited v Artemis Early Learning Limited HC Christchurch CIV 2010-409-1198

[2010] NZHC 1951

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2010-409-001198

BETWEEN  ABC DEVELOPMENTAL LEARNING CENTRES (NZ) LIMITED

Plaintiff

ANDARTEMIS EARLY LEARNING LIMITED

First Defendant

ANDCHRISTOPHER NIGEL THORNLEY Second Defendant

Judgment:      7 October 2010

JUDGMENT OF HON. JUSTICE FRENCH

as to Costs

[1]      In  my judgment  of  25  June  2010  I dismissed  ABC’s  application  for  an interim injunction.

[2]      As to costs, I expressed a provisional view that these should be reserved, but also stated that if the parties wished to make submissions on costs then they would have an opportunity to do so.

[3]      Since then, ABC has filed an application seeking indemnity costs in the sum of $64,527.67 against Mr Thornley.  It does so in reliance on a clause in the restraint of trade deed to which he and ABC were parties.

[4]      The clause in question reads:

5.5The vendor and the directors will be jointly and severally liable to pay all reasonable legal costs incurred by the purchaser in enforcing or attempting to enforce the obligations of the vendor and directors under this deed.

ABC DEVELOPMENTAL LEARNING CENTRES (NZ) LIMITED V ARTEMIS EARLY LEARNING LIMITED AND ANOR HC CHCH CIV-2010-409-001198  7 October 2010

[5]     Counsel for ABC has referred me to a number of authorities regarding contractual  indemnity  costs,  including  ANZ  Banking  Group  (NZ)  Ltd  v  Gibson [1986] 1 NZLR 556; Frater Williams & Co Limited v Australian Guarantee Corporation (NZ) Limited (1994) 2 New Zealand ConvC 191,873; Beecher v Mills [1993] MCLR 19 and Watson & Son Limited v Active Manuka Honey Association [2009] NZCA 595 (CA).

[6]      However, none of these cases are authority for the proposition that a party who is unsuccessful can invoke r 14.6(4)(e).   Indeed, on that subject the Court of Appeal in Watson had this to say:

[29]     Mr  Cooley  submitted  that  if  the  indemnity  were  available  as Panckhurst  J  found,  then  it  would  mean  that  the  Association  would  be entitled to indemnity costs in any litigation with Watson arising from the latter’s operations under the licence even if the Association failed in the litigation. The answer to this submission is that recovery by the Association in such circumstances would properly be denied on public policy grounds. It could not ordinarily be appropriate to allow a party who loses litigation to recover its costs from the successful party.

[7]      The normal rule is that costs should be fixed after an interlocutory application has been determined, and that costs should follow the event: see r 14.8(1) and r

14.2(a).  That would mean the defendants were entitled to costs.

[8]      The reason for my provisional view to the contrary was that on the face of it ABC’s case appeared strong and the injunction was only declined by a narrow margin.

[9]      In those circumstances, I considered the interests of justice were best served by preserving each party’s position on costs until the outcome of the substantive hearing is known.

[10]     I remain of that view, and accordingly now formally order that costs are to be reserved pending the outcome of the substantive hearing.

Solicitors:

Minter Ellison Rudd Watts, Auckland

McFadden, McMeeken, Phillips, Nelson