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

[2023] NZHC 754

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-2687

[2023] NZHC 754

BETWEEN

CAYMAN SPECTRUM (NZ) CO

First Plaintiff

EVEREST WIRELESS PARTNERS I LP
Second Plaintiff

AND

SPARK NEW ZEALAND TRADING LIMITED

Defendant

2DEGREES MOBILE LIMITED

Non-Party

Hearing:	By memoranda
Appearances:	M B Wigley for Plaintiffs O J Skilton for Non-Party
Judgment:	5 April 2023

JUDGMENT OF LANG J

[on costs payable to non-party]

This judgment was delivered by me on 5 April 2023 at 3 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date…………..

Solicitors / Counsel:

Wigley and Company, Wellington O J Skilton, Barrister, Auckland

CAYMAN SPECTRUM (NZ) CO v SPARK NEW ZEALAND TRADING LTD [2023] NZHC 754 [5 April 2023]

[1]                 On 7 February 2023 I heard several discovery applications filed by the plaintiffs against the defendant. I was scheduled to hear an application for non-party discovery against 2degrees Mobile Ltd (2degrees) the following day.

[2]                 On the morning of 8 February 2023 the plaintiffs withdrew their application for non-party discovery against 2degrees. I am now required to fix costs in relation to that application.

[3]                 2degrees seeks an order that it be reimbursed the legal costs it has incurred amounting to the sum of $47,165 exclusive of GST. It also seeks costs in relation to the preparation and filing of its memorandum and affidavit dealing with costs.

Background

[4]                 In this proceeding the plaintiffs claim that the defendant, Spark New Zealand Trading Ltd (Spark), assisted 2degrees in an attempt to acquire broadband spectrum to the plaintiffs’ commercial disadvantage. The plaintiffs sought non-party discovery against 2degrees to obtain evidence to support their claim.

[5]                 During June 2022 the plaintiffs’ solicitor entered into correspondence with 2degrees regarding documents that they believed 2degrees might hold that were relevant to the claim. By this stage the plaintiffs had filed an application seeking discovery of those documents from 2degrees.

[6]                 On 7 October 2022, the plaintiffs filed and served an amended application seeking varied orders as to discovery to be provided by 2degrees. Prior to the hearing counsel for the plaintiffs and 2degrees filed and served written submissions. Cayman had also filed several affidavits in support of its applications against both Spark and 2degrees.

[7]                 On 7 February 2023 counsel for the plaintiffs narrowed the scope of the documents the plaintiffs were seeking from 2degrees. He then withdrew the application against 2degrees immediately before it was due to be heard on the morning of 8 February 2023.

Relevant principles

[8]                 Rule 8.21 of the High Court Rules 2016 governs the procedure to be used where a party to a proceeding seeks particular discovery against a non-party. Where the Court makes an order under r 8.21 the costs regime set out in 8.22(3) applies. This provides as follows:

8.22     Costs of discovery

…

(3)If an order is made under rule 8.20(2) or 8.21(2), the Judge may, if the Judge thinks it just, order the applicant to pay to the person from whom discovery is sought the whole or part of that person’s expenses (including solicitor and client costs) incurred in relation to the application and in complying with any order made on the application.

[9]                 The issue for the Court in the present context is therefore whether it is just to make an order requiring the plaintiffs to pay the whole or part of 2degrees’ legal costs.

It does not matter that no order for discovery was ultimately made.1

[10]             The courts regularly make orders requiring a party to a proceeding to meet the reasonable legal costs incurred by a non-party in responding to an application for non- party discovery. This reflects the principle that non-parties have no stake or interest in the proceeding. They should not be put to unnecessary expense in providing assistance to those who have an interest in the outcome.

[11]             In AFI Management Ltd v Lepionka & Co Investments Ltd Fitzgerald J observed:

Further, while costs are always at the discretion of the court, and assuming the non-party’s response to the application was reasonable, that party’s (reasonable) actual costs ought to be met by the party seeking non-party discovery.

[12]             Where the Court finds costs claimed by a non-party to be unreasonable it will reduce them to a reasonable level.2

1      AFI Management Ltd v Lepionka & Co Investments Ltd [2018] NZHC 892 at [4].

2      See eg Beaman v Robinson [2022] NZHC 3590 at [24].

The arguments

[13]             On 2degrees’ behalf Mr Skilton submits that 2degrees acted reasonably at all times in response to the plaintiffs’ “broad and ill-defined application”. He says that at no stage did counsel for the plaintiffs identify the issues in dispute based on the pleadings. Nor did he clearly articulate why the documents sought were relevant to those issues. By way of example, Mr Skilton points out that the applications sought:

(a)all internal documents in 2degrees’ control “relevant to the Cayman management rights”, even though any internal consideration by 2degrees of Spark’s actions was not directly relevant to any issue in dispute between Spark and Cayman, based on the pleadings; and

(b)all external documents in 2degrees’ control relevant to the “Cayman management rights” irrespective of whether they were relevant to an issue in dispute or had already been discovered in the substantive proceedings by Spark or provided by MBIE following Cayman’s Official Information Act request.

(Counsel’s emphasis)

[14]             Mr Skilton says he informed Mr Wigley. counsel for the plaintiffs, that his clients’ application was misconceived and ought to be withdrawn. He also submits that the plaintiffs acted in a manner that caused 2degrees’ costs to escalate by:

(a)combining the discrete non-party discovery application with the various discovery applications against Spark. Cayman continued to maintain that its approach was appropriate even though 2degrees informed Cayman that its approach exacerbated 2degrees’ costs;

(b)maintaining that all documents filed in relation to its applications against Spark were relevant to the non-party discovery application. Cayman even refused to identify which sections of the voluminous affidavits and lengthy statement of claim were relevant to the application involving 2degrees. Instead, Cayman maintained that “all documents on the plaintiffs’ applications including against Spark are relevant to the applications against 2degrees, except for the application for Part 3 release;

(c)rejecting 2degrees’ without prejudice save as to costs offer.

[15]             Mr Skilton says the plaintiffs’ approach required him to review the extensive affidavits filed in support of both applications as well as the lengthy pleadings in the substantive proceeding. It also required him to be present during the hearing of the applications relating to Spark.

[16]             Mr Skilton also submits there would have been significant commercial ramifications for 2degrees if the plaintiffs’ application had succeeded. Many of the documents that the plaintiffs sought would have revealed 2degrees’ decision-making processes and its commercial priorities. These included management and board reports, budgets, predictions and strategy papers. Such documents are highly confidential in a commercial setting and would have been revealed to Spark, one of 2degrees’ major competitors.

[17]             Furthermore, 2degrees took the view that it may be required to meet the cost of any discovery exercise itself given that the plaintiffs are registered overseas and declined to provide security for costs. The plaintiffs also contended that costs should not be determined until discovery had been completed because the discovery process might reveal that 2degrees was implicated in breaches by Spark of the restrictive trade practice provisions of the Commerce Act 1986. This meant 2degrees was required to take a careful and considered approach to protect its interests.

[18]             For the plaintiffs, Mr Wigley largely takes issue with the quantum claimed by 2degrees. He points out that costs payable on a category 2B basis would amount to approximately $5,500. Given that the scale is intended to reimburse a party for approximately two thirds of actual costs he says actual costs should have been in the vicinity of $8,300. Mr Wigley points out that the sum claimed in the present case far exceeds the sums awarded in other cases where non-party discovery has been ordered.

[19]             Mr Wigley also submits the application for non-party discovery always had a narrow focus and that 2degrees could easily have triaged the documents relevant to the application. He contends 2degrees has “belted and braced” its approach, as demonstrated by the fact that Mr Skilton needlessly remained in Court on 7 February 2023 whilst the applications relating to Spark were heard. He says the plaintiffs should not be required to pay for 2degrees’ “gold plated approach”. He also submits that issues relating to confidentiality did not need to be considered prior to the hearing.

Decision

[20]             I consider the plaintiffs should reimburse 2degrees for the legal costs it has incurred, and for the reasons Mr Skilton has advanced.

[21]             I do not consider the sums awarded in other non-party discovery cases provide any real assistance because of the complexity of the present case and the commercial ramifications of the application for 2degrees. I consider it was entitled to take a “belts and braces” approach given the fact that the orders the plaintiffs sought would have resulted in confidential and commercially sensitive information being disclosed to one of its major competitors. Furthermore, I do not accept the application was narrow in focus. The breadth of the documents the plaintiffs sought would have extended the scope of the enquiries Mr Skilton was required to make significantly.

[22]             2degrees has actually incurred the costs for which it now seeks to be reimbursed as evidenced by the invoices attached to the affidavit filed in support of its claim. I do not consider the hourly rate Mr Skilton has charged to be unreasonable and Mr Wigley does not suggest this to be the case. Furthermore, given the scope of the issues Mr Skilton was required to confront I do not consider the time he spent on the application to be excessive. I do not consider he can be criticised for remaining in court whilst the applications involving Spark were heard because it gave him the opportunity to further understand the issues the substantive proceeding raises. This was plainly relevant to the application for non-party discovery.

[23]             I therefore direct that the plaintiffs are to meet 2degrees’ actual and reasonable legal costs in responding to the application.

[24]             It is also appropriate to award costs on the memorandum filed by Mr Skilton in support of the application for costs. I therefore award 2degrees costs on a Category 2B basis for the memorandum together with a 50 per cent uplift.

Lang J