About Image Limited v Advaro Limited

[2018] NZHC 663

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-2183

[2018] NZHC 663

BETWEEN

ABOUT IMAGE LIMITED and OTHERS

Plaintiffs

AND

ADVARO LIMITED

Defendant

ADVARO FUNDING LIMITED
Counterclaim Plaintiff

JENNIFER DOHERTY and OTHERS

Counterclaim Defendants

Hearing:	On the papers
Counsel:	DM Fraundorfer and JW McDougall for plaintiffs DH McLellan QC and J Adams for defendant
Judgment:	12 April 2018

JUDGMENT OF FITZGERALD J

[As to costs of interlocutory applications]

This judgment was delivered by me on 12 April 2018 at 4 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Holland Beckett, Tauranga (T Conder)

Simpson Western, Auckland (P Hunter)

About Image Limited v Advaro Limited [2018] NZHC 663 [12 April 2018]

Introduction

[1]    On 20 December 2017, I delivered judgment on the plaintiffs’ application that this proceeding continue as a representative action for the purposes of r 4.24 of the High Court Rules. In addition, the defendant had filed an application in relation to discovery, and my judgment dealt with that application also. The parties have subsequently filed costs memoranda in relation to those applications.

Application for representative orders

[2]    The essence of the plaintiffs’ application was that the proceeding continue as a representative action in respect of a number of common issues. For the reasons set out in my judgment, I declined to grant an order that the proceeding continue as a representative action, given all of the relevant parties are already plaintiffs to this proceeding. I did, however, grant the application insofar as it sought the determination of a number of issues common to all plaintiffs, at a Stage 1 trial. This was based on one of the two alternative sets of common issues proposed by the plaintiffs. Nevertheless, not all of the issues which the plaintiffs submitted were common issues were in fact determined by me to be common issues amenable to a Stage 1 trial. Moreover, the position reached on a Stage 1 trial was brought about to a certain extent by the plaintiffs’ acceptance at the hearing that they did not propose to rely on the “Explanation” (as defined in the pleadings) as part of the factual basis for certain of the common issues.

[3]    Accordingly, the plaintiffs were partly successful and partly unsuccessful on their interlocutory application. Given this, it is necessary to consider whether they ought nevertheless to be awarded costs on their interlocutory application, and if so, in what amount.

[4]    The Court of Appeal has, in two relatively recent judgments, confirmed the appropriate approach to costs where a party has been only partly successful.

[5]    In Weaver v Auckland Council, the Court reinforced that the “loser” ordinarily pays, and observed that although the appellants in that case had not succeeded to the full extent of their damages claim (but only roughly to half that extent), “success on

more limited terms is still success”.1 The Court went on to observe that given the limited success in that case, the award of costs to the appellants was to be reduced by 50 per cent.

[6]    These observations reflected and reinforced the Court of Appeal’s comments in Water Guard NZ Ltd v Midgen Enterprises Ltd, a decision issued shortly before Weaver v Auckland Council.2 In that case, the plaintiff had succeeded in only two of its five claims. The High Court had considered that 75 per cent of trial time had been devoted to the plaintiff’s unsuccessful claims, and so found the defendant to be the overall successful party. Costs were awarded on that basis, also taking into account what the High Court considered to be the plaintiff’s unreasonable conduct in declining pre-trial settlement offers.3

[7]    The Court of Appeal overturned the High Court’s costs orders. It emphasised that it was unprincipled to award costs to the losing side. It disagreed with the High Court that the plaintiff had lost the status of being the overall “successful” party because it failed on most of its claims which had occupied most of the trial. It observed that those matters can be properly recognised in other ways, such as reducing costs otherwise payable or ordering costs to lie where they fall. Overall, the Court considered that while the plaintiff was strictly successful, costs should nevertheless lie where they fall, in light of the declined settlement offers and the trial-time allocation, stating:

[18] When viewed in the round, allowing the burden of costs to lie where they fall in what was fruitless and uneconomic litigation accords with the overall justice of the case.

Discussion – plaintiffs’ application

[8]    In the context of the plaintiffs’ application, and consistent with the Court of Appeal authority discussed above, I do not consider the plaintiffs lost their status as the “successful” party on that application because they did not succeed on all aspects

1      Weaver v Auckland Council [2017] NZCA 330 at [26].

2      Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36.

3      Costs were awarded to the defendant (on a 2B basis) for 75 per cent of the trial where it was successful, but only for one counsel to take into account its failure on the two proven claims. Though the defendant was unsuccessful on the remaining 25 per cent, no costs were awarded in the plaintiff’s favour for that portion of the proceeding, because of the unreasonable conduct.

of it, or given they made the concession during the hearing in relation to the Explanation. Ultimately, the plaintiffs have achieved some of what they sought on their interlocutory application, namely a Stage 1 hearing of a number of common issues. As the Court of Appeal observed in Weaver, success on more limited terms is still success.

[9]    Nevertheless, r 14.7(d) enables a court to refuse to award costs, or to reduce costs which would otherwise be awarded to the “successful” party, on the basis that the party that failed in respect of a cause of action or issue which significantly increased the costs of the party opposing costs. This step of adjusting costs as may be necessary to reflect partial success and partial failure was recognised and adopted by the Court of Appeal in Weaver and in Water Guard.

[10]   In this case, the plaintiffs were wholly unsuccessful in their application that the proceeding proceed by way of a representative proceeding. The parties nevertheless devoted not insignificant time and resources to submissions on that point. On a very broad estimate, approximately a quarter of the submissions and hearing concerned the nature and application of the rules relating to representative proceedings.

[11]   The balance of time in relation to the plaintiffs’ application was devoted to discussion and examination of the proposed common issues. In relation to those matters, I cannot exclude as a realistic possibility that considerably more progress could have been made on the application, possibly avoiding the need for a full defended hearing, or at least further refining the matters in contention, had the plaintiffs confirmed from the outset that they did not propose to rely on the Explanation in the context of the suggested common issues. The plaintiffs also did not succeed on a number of the common issues they proposed for a Stage 1 trial. In these circumstances, and given the broad and realistic approach mandated by the Court of Appeal in Water Guard and Weaver, I consider an appropriate award of costs on the plaintiffs’ application is an award of costs to the plaintiffs on a 2B basis, but reduced by 60 per cent. The filing fee disbursement is awarded in full. In light of the amounts claimed in the schedule to the plaintiffs’ costs memorandum, this results in a costs

award in the plaintiffs’ favour on that interlocutory application of $3,354.40.4 I make a costs order to that effect.

[12]   The plaintiffs also seek an order effectively overturning previous costs orders in the defendant’s favour made by Duffy J, on the plaintiffs’ earlier (adjourned) application for a strike out or separate trial.

[13] It is correct that the outcome of my judgment of 20 December 2017 is the granting of a separate trial on the common issues. However, the plaintiffs are being appropriately compensated in that regard, by the costs award I have made at [11] above. Putting aside that I have real doubts I have jurisdiction to order a “refund” of a previous costs award made by another High Court Judge, I do not consider it would be appropriate for me to do so in any event. Duffy J plainly found the earlier application to be premature. Duffy J was in the best position to assess where costs should lie on that application. There is no basis to interfere with her Honour’s orders. Ultimately, the plaintiffs could not persuade the Judge that it was appropriate to make the orders sought at that stage. Accordingly, putting aside the jurisdiction point, I decline to make any orders in relation to Duffy J’s earlier costs orders.

Defendant’s application for discovery

[14]   I regret that some confusion has arisen as to whether costs on the defendant’s discovery application are to be fixed now. This arises from [94] of my judgment dated 20 December 2017, referring to costs on the plaintiffs’ application only. That ought also to have referred to costs on the defendant’s application. I can see no reason why the ordinary approach and desirability of costs on interlocutory applications being determined at the time the application is disposed of ought to be displaced in relation to this particular application.

[15]   On the basis it understood the Court’s view to be that costs on the discovery application were to be reserved, the defendant has not filed a substantive memorandum responding to the plaintiffs’ submissions on the costs of this application. Accordingly, and as requested at paragraph 9 of the defendant’s memorandum dated 8 February

4      Being $2,854.60 plus $500.

2018, I grant the defendant leave to file a memorandum on the costs of its discovery application, in response to the submissions already made by the plaintiffs. Any such memorandum is to be filed within 10 working days of this judgment and is not to be longer than 5 pages in length.

[16]   It may be helpful to the parties if I indicate at this stage that the defendant’s discovery application gives rise to similar issues as to the plaintiffs’ application for representative orders, in that the defendant was only partially successful on that application. For example, it was not successful in obtaining the unless orders sought. It was partly successful in obtaining orders relating to the plaintiffs’ claim to privilege and (effectively by consent) the verification of what is referred to as the “master list”. In those circumstances, a modest award of scale costs to the defendant on the discovery application may be appropriate.

[17] If the parties are unable to agree costs on the discovery application then upon receipt of the defendant’s memorandum referred to at [15] above, I will determine the costs of that application on the papers in a separate judgment.

Fitzgerald J