Cayman Spectrum (NZ) Co v Spark New Zealand Trading Limited

[2023] NZHC 1152

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-2687

[2023] NZHC 1152

BETWEEN

CAYMAN SPECTRUM (NZ) CO

First Plaintiff

EVEREST WIRELESS PARTNERS I LP
Second Plaintiff

AND

SPARK NEW ZEALAND TRADING LIMITED

Defendant

Hearing:	On the papers
Appearances:	F Pilditch KC and M B Wigley for Plaintiffs Z Kennedy and T Leggatt for Defendant
Judgment:	15 May 2023

JUDGMENT OF LANG J

[on costs]

This judgment was delivered by me on 15 May 2023 at 2.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

Solicitors:

Wigley and Company, Wellington F Pilditch KC, Auckland

O J Skilton, Barrister, Auckland

CAYMAN SPECTRUM (NZ) CO v SPARK NEW ZEALAND TRADING LTD [2023] NZHC 1152 [15 May 2023]

[1]    On 7 February 2023 I heard several interlocutory applications by the plaintiffs and one application by the defendant. The defendant, Spark New Zealand Trading Ltd (Spark), sought orders that material filed in relation to the plaintiffs’ applications not be published. The plaintiffs ultimately did not oppose that application and I made orders as sought.

[2]    At the commencement of the hearing the following applications by the plaintiffs remained outstanding:

(a)an application for orders under s 67 of the Evidence Act 2006 (the Act) disallowing Spark’s claims to legal privilege (the s 67 application);

(b)an application for orders under s 65 of the Act that Spark had waived its claims to confidentiality in relation to certain documents (the s 65 application);

(c)an application requiring Spark to file a further affidavit of documents; and

(d)an application for orders setting aside Spark’s remaining claims to confidentiality.

[3]    In addition, the plaintiffs had applied for orders requiring Spark to provide answers to interrogatories. Spark supplied its answers to the interrogatories in an affidavit filed at the same time as it filed and served the notice of opposition to the remaining applications. The plaintiffs were therefore not required to pursue this application.

[4]    During the hearing counsel for the plaintiffs progressively abandoned all but one of the remaining applications. This left the s 67 application, in which the plaintiffs sought an order disallowing Spark’s claim to legal privilege in relation to certain documents on the basis that they were prepared for a dishonest purpose or to enable the commission of an offence.

[5]    Towards the end of the hearing, having been taken by counsel to the documents in question, I advised Mr Pilditch, who appeared as senior counsel for the plaintiffs, that I did not consider the documents to which this application related came close to meeting the threshold required under s 67. At the end of the hearing on 8 February 2023 Mr Wigley, junior counsel for the plaintiffs, advised me that he would need to take instructions as to whether the plaintiffs wished to withdraw the application in light of the indication I had given. Mr Wigley confirmed in a memorandum filed following the hearing that the plaintiffs withdrew the s 67 application and did not require a judgment.

[6]    The parties have been unable to reach agreement regarding costs on the applications that were before the Court on 7 February 2023. I am therefore required to determine costs based on the memoranda counsel have filed.

The costs sought

[7]Spark seeks costs as follows:

(a)indemnity costs in relation to the s 67 application; and

(b)costs calculated on a Category 3C basis together with a 50 per cent uplift in relation to the remaining applications.

[8]    The plaintiffs seek costs calculated on a Category 3B basis for the notice to answer interrogatories and the resulting application.

[9]    Counsel for Spark point out that the s 67 application occupied approximately 60 per cent of the written submissions filed by both parties and approximately the same proportion of hearing time. Spark therefore says it should be entitled to 60 per cent of its actual and reasonable costs to reflect its success on the s 67 application. It says the s 65 application occupied approximately 20 per cent of the written submissions and hearing time, whilst the remaining applications occupied 10 per cent each.

[10]   Spark has incurred total costs of $114,623.33 in relation to all the plaintiffs’ applications other than the application for non-publication orders. It therefore seeks the sum of $68,774 on an indemnity basis for the s 67 application. It seeks increased costs amounting to $21,074.10 for the remainder of the plaintiffs’ applications. It also claims disbursements amounting to $95.65, leading to a total sum claimed of

$89,943.75. In addition, it seeks $5,729.68 on its application for non-publication orders.

[11]   The plaintiffs seek costs amounting to $5,648 on the notice to answer interrogatories and the subsequent application for orders requiring Spark to answer interrogatories.

Costs sought by Spark on the plaintiffs’ applications other than in relation to interrogatories

[12]   Indemnity costs are governed by r 14.6 of the High Court Rules 2016. This permits the Court to make an order for indemnity costs where a party has acted vexatiously, frivolously, improperly or unnecessarily in taking a step in a proceeding.1 It is now well established that indemnity costs will only be awarded where a party has behaved very badly or very unreasonably.2 Such an award is exceptional and requires flagrant misconduct on the part of the party against whom costs are awarded.3

[13]   In the present case Spark relies on the fact that its solicitors and counsel advised counsel for the plaintiffs repeatedly that Spark did not consider the documents in question engaged s 67. Spark’s notice of opposition also stated clearly that there was no basis for the application. The submissions filed in opposition to the application then explained in detail why it could not succeed.

[14]   The plaintiffs oppose an award of indemnity costs. They say they acted reasonably in bringing the application and that there was an evidential basis to support it. They also say they took advice from senior counsel before electing to proceed with it. Although they have not placed this advice before the Court, they say it confirmed

1      High Court Rules 2016, r 14.6(4)(a).

2      Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

3 At [28].

that the application could properly be brought and there was an evidential basis for it. Given the seniority of counsel who gave the advice I accept Mr Wigley’s assurance that the advice was given and do not require it to be placed before the Court.

[15]   The fact that a party has taken legal advice before advancing an unmeritorious argument on the basis of legal advice from independent counsel will obviously not insulate that party from an adverse award of costs. However, it is a factor that may be relevant when assessing whether the party has acted very badly or very unreasonably. Having regard to this factor I do not consider the plaintiffs’ conduct reaches the level required for an award of indemnity costs.

[16]   However, I consider that Spark’s submissions ought to have persuaded the plaintiffs that the documents did not establish a prima facie case of dishonesty or potentially criminal wrongdoing on the part of Spark and its employees. The plaintiffs’ decision to proceed with the application after receiving Spark’s submissions meant they ultimately pursued an argument that lacked merit and failed without reasonable justification to accept Spark’s  legal argument.   Jurisdiction therefore exists under     r 14.6(3)(b)(ii) and (iii) to make an award of increased costs on the s 67 application.

[17]   Counsel for the plaintiffs contend Spark should not be able to claim costs separately in relation to a memorandum filed prior to the hearing challenging the admissibility of aspects of the plaintiffs’ evidence. The plaintiffs contend that these issues could, and should, have been dealt with in Spark’s written submissions filed in opposition to the plaintiffs’ applications.

[18]   I do not accept this submission. Challenges to admissibility of evidence are frequently dealt with separately to substantive argument and I consider that to have been appropriate in the present case. Spark is entitled to costs on the memorandum.

[19]   I consider it appropriate to require the plaintiffs to pay costs on a category 3B basis for all steps prior to the filing and service of Spark’s submissions. This will exclude the memoranda prepared for the case management conference on 25 October 2022 and the challenge to the admissibility of the plaintiffs’ evidence. Both were

lengthy documents and dealt with a range of significant issues. Band C is appropriate for these items to reflect that fact.

[20]   In addition, Spark’s submissions for the hearing on 7 February 2023 were required to address all four of the plaintiffs’ applications. Spark should therefore receive costs on a Category 3C basis for the filing of the submissions.

[21]   I agree that the s 67 application occupied the bulk of the hearing time. I consider 60 per cent to be a fair apportionment of the total time spent on that application.

[22]   Spark is therefore entitled to costs on a category 3C basis for the hearing on  7 and 8 February together with an uplift of 60 per cent to reflect the fact that the plaintiffs should not have proceeded with their argument under the s 67 application once they received Spark’s submissions. Spark is also entitled to disbursements as fixed by the Registrar.

The application by the plaintiffs for an order requiring Spark to answer interrogatories

[23]   The plaintiffs filed and served this application on 8 September 2022. It formed part of an omnibus application containing all the applications that were ultimately before the Court on 7 February 2023. Spark points out that the plaintiffs filed and served the application just two working days after they had served a notice on Spark requiring it to answer interrogatories. They did so despite the fact that the notice had given Spark 10 working days within which to answer the interrogatories. The plaintiffs therefore filed their application well before the expiry of the time within which Spark was required to provide answers to the interrogatories.

[24]   I accept Spark’s submission that the plaintiffs’ application was premature by a significant margin. I therefore consider costs should lie where they fall in relation to the application, but the plaintiffs will be entitled to costs on a category 3B basis for filing and serving the notice.

The application by Spark for a non-publication order

[25]   Spark filed and served this application at 2.47 pm on the last working day before the hearing. Counsel for Spark say they did not attempt to engage with the plaintiffs before filing the application because they believed consent would not be forthcoming.

[26]   The plaintiffs did not immediately agree to the orders and contended that the hearing should proceed before the application was considered. I did not consider this to be appropriate and made non-publication orders as sought. Given that background I accept that Spark is entitled to costs on the application but I do not consider an award of increased costs is justified. Spark is accordingly entitled to costs on a category 3B basis in relation to this application together with disbursements as fixed by the Registrar.

Leave reserved

[27]   I reserve leave to both parties to seek further clarification of the orders I have made if they cannot reach agreement regarding the nature and scope of the orders.

Lang J