Chief Executive of the Department of Corrections v Fujitsu New Zealand Limited
[2024] NZHC 926
•24 April 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2021-485-423
[2024] NZHC 926
BETWEEN HIS MAJESTY THE KING IN RIGHT OF NEW ZEALAND ACTING BY AND
THROUGH THE CHIEF EXECUTIVE OF THE DEPARTMENT OF CORRECTIONS
PlaintiffAND
FUJITSU NEW ZEALAND LIMITED
Defendant
AND
DASSAULT SYSTÈMES AUSTRALIA PTY LIMITED
Third Party
Hearing: 7 March 2024 Appearances:
C Elliott KC, M B Wigley and J T H Koru-Morris for the Defendant
C F Finlayson KC, A J Horne and C M Hoeft for the Third Party M R M Gale for Department of Corrections
Judgment:
24 April 2024
JUDGMENT (NO 2) OF COOKE J
(Recall, quantum, interest, costs)
Table of Contents
Para No
Recall [3]
Repeating an argument already rejected [7]
Limitation of liability was pleaded [10]
Surprise [19]
Quantum [24]
Department’s judgment against Fujitsu [25]
Fujitsu’s judgment against Dassault [27]
Costs [29]
Department’s claim against Fujitsu [31]
CHIEF EXECUTIVE OF THE DEPARTMENT OF CORRECTIONS v FUJITSU NEW ZEALAND LIMITED [2024] NZHC 926 [24 April 2024]
(i)Steps [33]
(ii)Settlement offers [38]
Department’s claims against Dassault [43]
Fujitsu’s claim against Dassault [50](i)Fujitsu’s claims to recover costs awarded against it [51]
(ii)Categorisation [57]
(iii)Schedule 3 claims [59]
Conclusion and summary [67]
[1] By judgment dated 8 December 2023 I upheld claims made by the Department of Corrections’ (the Department), against the defendant (Fujitsu) and also upheld, in part, Fujitsu’s claims against the third party (Dassault).1 This judgment deals with remaining matters that fall to be determined following delivery of the judgment, including an application for recall, and the question of costs.
[2] I will not set out the background and circumstances of the litigation which are set out in full in the primary judgment. This judgment should be read alongside that judgment.
Recall
[3] By application dated 22 December 2023 Fujitsu applies to recall the judgment under r 11.9 of the High Court Rules 2016 in relation to its claims against Dassault. The application is opposed by Dassault. The Department abides. I timetabled the filing of written submissions on the application and then had a short hearing at which these submissions were addressed.
[4] Fujitsu argues that a central issue upon which its third party claim against Dassault largely failed – the application of clauses in the relevant agreements which limited any liability to certain amounts – was not pleaded by Dassault in relation to Fujitsu’s claim against Dassault under the Fair Trading Act 1986 (the FTA), and that the Court erred in largely upholding Dassault’s defence based on these clauses. It says that the issue was not squarely raised by Dassault, that it was taken by surprise, and that the Court did not have the benefit of argument on the relevant issues. It argues that this provides good reason to recall the judgment, and if necessary have further
1 Chief Executive of the Department of Corrections v Fujitsu New Zealand Ltd [2023] NZHC 3598.
argument on those issues in accordance with the approach to recall recognised in
Horowhenua County v Nash (No. 2).2
[5] In terms of its underlying arguments Fujitsu says that there is a significant difference between contractual terms in the nature of entire agreement and non- reliance clauses which are specifically referred to in s 5D(2) of the FTA, and limitation of liability clauses which are not the type of clause referred to in s 5D(2). It says that Dassault had rightly not relied on limitation of liability clauses, or not relied on them clearly enough in mounting its defence to Fujitsu’s third party claim under the FTA, and the Court should now recall the judgment to allow proper argument on those questions.
[6] I do not need to address all the submissions that were advanced on this application as it seems to me that Fujitsu’s application for recall cannot be sustained for three related reasons.
Repeating an argument already rejected
[7] The first point is that Fujitsu’s argument about Dassault’s pleaded defence to the FTA claim was advanced by it in its closing submissions. I then addressed that argument in the judgment. I said at footnote 51:
There is nothing in Fujitsu’s argument that Dassault did not plead reliance on s 5D of the FTA. It pleaded reliance on the clauses of the agreement, which is sufficient.
[8] Fujitsu is merely repeating the argument that it advanced in closing submissions by way of an application for recall. It is inviting me to change my mind. But I have considered and rejected the argument that Fujitsu advances in the judgment. The recall jurisdiction is not an appropriate avenue to seek to persuade the Court again. Any assessment of whether the Court was wrong is undertaken by the Court of Appeal.
[9] There will be situations where the Court has reached conclusions when the matter was not properly advanced before it, such as in the cases relied upon by Fujitsu.3
2 Horowhenua County v Nash (No. 2) [1968] NZLR 632 (SC).
3 Sipka Holdings Ltd v Merj Holdings Ltd [2015] NZHC 3073.
But this is not such a case — Fujitsu advanced the pleading argument, and I rejected it. It is not suggested that the consideration and rejection of that argument itself involved procedural unfairness. Rather Fujitsu’s argument was that I should have accepted the pleading argument that it advanced in its closing submissions. This criticism of the judgment engages the appeal jurisdiction, not the recall jurisdiction. The recall jurisdiction is simply not relevant.
Limitation of liability was pleaded
[10] By itself this is sufficient reason to dismiss the recall application. But in any event I remain of the view that Fujitsu’s argument relating to Dassault’s pleading is without merit. As Fujitsu argues pleadings are fundamental to civil litigation.4 But Dassault squarely raised the limitation of liability clauses as an affirmative defence to the FTA claim in its pleading. In its statement of defence to Fujitsu’s fifth amended statement of claim dated 24 September 2023 Dassault pleaded a third affirmative defence. The heading of that defence was:
BY WAY OF THIRD AFFIRMATIVE DEFENCE TO DEFENDANT’S FIRST TO SEVENTH CAUSES OF ACTION: LIMITATION AND EXCLUSION OF LIABILITY AND EXCLUSION OF INTEREST LOSSES
[11] Dassault then set out the clauses of the agreements that limited liability to certain amounts, including the clause of the Teaming Agreement limiting liability to AUD 10,000 and the clause of the Reseller Agreement limiting liability to €100,000. These were the clauses of the agreements which the Court ultimately held applied to the FTA claim.
[12] Fujitsu argues that this pleading did not sufficiently make clear that these clauses were relied upon as a defence to Fujitsu’s claim under the FTA. I do not accept that submission. The clauses were relied upon as an affirmative defence “to defendant’s first to seventh causes of action”. Dassault’s claim under the FTA was its third cause of action. So the pleading raised an affirmative defence, in reliance on these clauses, as a defence to Dassault’s claim under the FTA. It is also notable that this affirmative defence was pleaded as a separate alternative defence to the second
4 Al-Medenni v Mars UK Ltd [2005] EWCA Civ 1041, [2005] All ER (D) 239 (Jul) at [21].
affirmative defence, which pleaded reliance on the entire agreement and non-reliance clauses in the agreements. In other words there was a separate affirmative defence pleaded based on the different type of clauses.
[13] Fujitsu argues that the position was not made sufficiently plain because, unlike the second affirmative defence concerning the entire agreement and non-reliance clauses, Dassault made no express reference to s 5D of the FTA. It is true that Dassault did expressly refer to s 5D in its second affirmative defence.5 But there are three difficulties with Fujitsu’s argument that this gave rise to the inference that s 5D was not relied upon in the third affirmative defence.
[14] First, pleading that the limitation of liability clauses were an affirmative defence to Fujitsu’s FTA claims against Dassault necessarily engaged s 5D as a matter of law. Section 5C provides:
5C No contracting out: general rule
(1)The provisions of this Act have effect despite anything to the contrary in any agreement.
(2)A provision of an agreement that has the effect of overriding a provision of this Act (whether directly or indirectly) is unenforceable.
(3)Subsections (1) and (2) are subject to subsection (4) and section 5D.
(4)Nothing in subsection (1) or (2) applies in respect of a provision that—
(a)imposes a stricter duty on the supplier than would be imposed under this Act; or
(b)provides a more advantageous remedy against the supplier than would be provided under this Act.
(5)In this section and section 5D, agreement includes any contract, arrangement, or understanding.
[15] Section 5D then provides that despite s 5C parties may include a provision in the agreement that will directly or indirectly allow the parties to engage in contravening conduct if the circumstances specified in the section are met. So Dassault’s reliance on the clauses of the agreement to limit or exclude any liability under the FTA obliged the Court to apply ss 5C and 5D. There was no need for
5 See paragraphs [98(b)], [101(b)], [104(b)] and [109(b)].
Dassault to expressly refer to either of those sections. They arose to be applied as a matter of law. They were an inescapable consequence of pleading reliance on the clauses of the agreement in response to the FTA claim.
[16] The second related point is that the way in which the limitation of liability clauses are a defence to the FTA claim is through the application of s 5D, and accordingly this is what the pleading must be understood to have meant. When I asked Mr Elliott KC how Dassault could be mounting an affirmative defence to the FTA claim in reliance upon these clauses other than by the application of s 5D he suggested that Dassault could have been mounting an argument that the clauses prevented the grant of a remedy for breach of the FTA in accordance with the discretion under s 43. But the case that Fujitsu relied upon in support of its application itself found that the liability and remedy provisions of the legislation are “inextricably entwined”.6 Moreover s 43 was not referred to in Dassault’s pleading either, so it makes little sense to suggest that Fujitsu understood the pleading to relate to s 43 and not s 5D.
[17] Finally, as Mr Finlayson KC argued, the third affirmative defence included Dassault repeating its pleadings in the preceding paragraphs.7 That included a repetition of the paragraphs that pleaded reliance on s 5D. It then went on to plead that the clauses of the agreement meant that any liability it faced was limited. So, for example, at paragraph [112] it pleaded that because of the terms of the Teaming Agreement “any entitlement that Fujitsu may have to damages is limited to AUD
$10.000”. And, as I say, that pleading was advanced as an affirmative defence to the FTA claim.
[18] For these reasons I do not agree that Dassault did not plead reliance upon the limitation of liability clauses as a defence to Fujitsu’s FTA claim. It did so in express terms.
6 Viterra Malt Pty Ltd v Cargill Australia Ltd [2023] VSCA 157 at [436].
7 At para [110].
Surprise
[19] Finally, I do not accept Fujitsu’s further and/or alternative argument that it has been taken by surprise by the Court addressing and determining Dassault’s argument that any liability under the FTA was limited to the amount specified in the agreements. The fact that Dassault’s pleading raised this defence as an affirmative defence also means that any surprise arose from Fujitsu’s own error, and not an error of the Court or Dassault. The point of pleadings is to identify what a party relies upon. Any misinterpretation of Dassault’s pleading is not the fault of Dassault.
[20] Dassault’s reliance on the limitation of liability clauses as an affirmative defence was first raised over a year before trial in its first statement of defence to Fujitsu’s third party claim dated 3 March 2022. It then repeated this defence in all its later pleadings, including its statement of defence to the defendant’s third amended statement of claim dated 5 May 2023, its amended statement of defence to the third amended statement of claim dated 5 September 2023 and then in its pleading at trial. At no stage has Fujitsu sought to raise, or clarify any ambiguity it suggested arose from Dassault’s pleading. It did not do so in opening, or in any communication between the parties. The first time that Fujitsu raised its pleading argument was at the very end of the case after all parties had closed their cases. Indeed it did not do so until after Dassault had already presented its closing submissions to the Court.8
[21] Parties to significant commercial litigation, represented by experienced counsel, can be expected to engage in processes that identify the issues in dispute.9 Fujitsu did not raise the pleadings point before taking the point in its closing submissions. Had it raised the point earlier I have no doubt that Dassault would have reiterated what I consider its pleading actually said — that Dassault relied upon the limitation of liability clauses in defence of all of the claims identified, including the claim under the FTA.
8 Written closings were not served in advance of them being presented to the Court.
9 For example, rr 7.3 and 7.4 and sch 5 of the High Court Rules 2016 require the parties to have discussed and attempted to agree upon the issues arising in the proceedings, and whether the pleadings require amendment, during case management.
[22] I also understood Mr Elliott to say that the potential ambiguity of Dassault’s pleading had been identified by Fujitsu, but after carefully considering the position the view was taken that Fujitsu’s pleading argument was correct. Given the above background electing not to earlier raise the point seems to me to involve Fujitsu seeking to take Dassault by surprise, not the other way round. In any event by deciding to proceed in that way, and not seeking to have the matter clarified either in communications with Dassault or with the Court, Fujitsu ran the risk that its interpretation of Dassault’s pleading was wrong as the Court has now found.
[23] For these reasons I do not accept Fujitsu’s arguments, and dismiss the application for recall. Dassault are entitled to the costs of the application calculated on a 3B basis.
Quantum
[24] The judgment I issued on 8 December 2023 was an interim judgment under r 11.2(a) of the High Court Rules with leave being reserved to address the appropriate calculation of quantum, interest, and a margin that Fujitsu would have charged on the amount that has led to its judgment against Dassault. The parties have filed memoranda in relation to those issues.
Department’s judgment against Fujitsu
[25] Following the initial exchange of memoranda, a joint memorandum has been filed by the Department and Fujitsu in relation to the appropriate calculation of the damages awarded to the Department. Some corrections have been identified, but most significantly Fujitsu has raised, for the first time, that the Department’s claims have included GST. Fujitsu had invited the Department to reconsider the amounts of the judgment, and as a consequent the Department has agreed that the amounts awarded should not include GST. Fujitsu has recorded its appreciation for the way the Department has handled the GST issue. I share that appreciation.
[26] In addition the Department and Fujitsu have agreed the dates from which particular aspects of the claim for damages should be calculated. As a consequence the following final orders can be made:
(a)The judgment debt due to the Department from Fujitsu is
$3,553.244.26;
(b)Interest calculated by reference to the Ministry of Justice civil debt interest calculator is payable on that judgment debt from the following dates until the date the judgment debt is paid:
(i)19 December 2018 in respect of $140,266.08;
(ii)20 February 2019 in respect of $1,596,531.00;
(iii)26 March 2019 in respect of $28,774.00;
(iv)30 April 2019 in respect of $169,029.97;
(v) 21 May 2019 in respect of $105,509.09;
(vi)19 June 2019 in respect of $110,810.48; and
(vii)6 August 2021 in respect of $1,402,323.50.
Fujitsu’s judgment against Dassault
[27] A similarly co-operative approach has been followed by Fujitsu and Dassault in relation to the amount of the judgment in Fujitsu’s favour. At paragraph [304] of the judgment I ordered that an amount of the judgment should be $1,836,010.65 less any amount charged as a margin by Fujitsu.
[28] The parties have proposed, and I agree, that the appropriate way of identifying the margin is to identify the amount actually paid to Dassault in Australian dollars and then convert that amount to New Zealand dollars at the time of payment. They are agreed that the results amount of the judgment award extracting Fujitsu’s margin is
$1,323,559.33. The parties are also agreed that interest should be payable from 12 December 2018 in accordance with the Ministry of Justice civil debt calculator.
The amount the judgment should accordingly be $1,323,559.33 with interest from 12 December 2018 calculated on that basis.
Costs
[29] In relation to costs I directed that memoranda be filed following judgment. There are a number of claims to address and complexities arising in relation to each of the costs claims. The following matters require determination:
(a)the Department’s claim for costs against Fujitsu;
(b)the Department’s claim for costs against Dassault;
(c)Fujitsu’s claims for costs against Dassault;
(d)Dassault’s claims for costs against Fujitsu.
[30] In responding to the points that have been raised by the parties I repeat the observations I made in Lepionka & Co Investments Ltd v Gibson Sheat that the costs regime is designed to be highly predictable, with costs normally determined by the application of the schedules in accordance with the rules.10 The scope of the discretion to depart from what the schedules is largely provided within the rules themselves. There is a residual overriding discretion under r 14.1, but that discretion should be exercised consistently with the principles of the regime.11 When there is a need to make costs decisions that are not directly addressed by the rules and the schedules the appropriate approach is to follow, as closely as possible, the principles set by the rules and the schedules. If practitioners follow this approach the extent of the disagreements between them will be minimised, and the need to approach the Court with lengthy memoranda following a judgment will be reduced.
10 Lepionka & Co Investments Ltd v Gibson Sheat [2023] NZHC 2745 at [3]–[7].
11 At [6]; Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [43]–[48].
Department’s claims against Fujitsu
[31] There is a measure of agreement in relation to the award of costs in favour of the Department against Fujitsu. Fujitsu notes that it will seek to recover these costs from Dassault, and otherwise takes issue with particular elements of the claim.
[32]Fujitsu agrees with the calculation of the award on a 3C basis in the amount of
$344,175.00. It also agrees with the Department’s claim for disbursements in the amount of $159,056.59. It does not agree to the balance of the Department’s claims. I note that Dassault disagrees with the proceedings being categorised as category 3, which is a matter I will address below.
(i)Steps
[33] First the Department seeks awards beyond the band C allowance for: discovery and inspection (steps 20 and 21) seeking 50 rather than 13 days; preparing briefs and other matters (step 33) seeking 50 rather than 12.75 days; preparing the bundle (step 33A) seeking 5 rather than 0.5 days; and preparation for hearing (step 33B) claiming 40 rather than 12.75 days. These increases are sought on the basis that greater time than contemplated by the schedules was involved.
[34] Fujitsu accept that some uplifts may be justified, submitting that at the end of the day it is a matter for judicial assessment, informed by a sense of moderation, taking into account the lack of evidence provided by the Department for such claims, as well as the need to avoid the costs award becoming punitive. Fujitsu suggests that two thirds of the number of days of uplift claimed may be appropriate on that approach.
[35] Whilst rr 14.2(c) and 14.5(1) appear prescriptive there is jurisdiction to allow higher time allocations under r 14.6(3)(d), and this has been applied with significant commercial litigation.12 I do not see the present case is in quite the same category as other commercial cases where such increases have been allowed, however. It was a more modestly sized claim, although conducted in a way usually contemplated for
12 Trustpower Ltd v Commissioner of Inland Revenue [2014] NZHC 3072; Kidd v van Heeran (No 5) [2015] NZHC 3191; Strathboss Kiwifruit Ltd v Attorney-General [2019] NZHC 62; Mainzeal Property and Construction Ltd (in liq) v Yan [2019] NZHC 1637; Houghton v Saunders & Ors [2021] NZHC 3590 at [55]–[60].
more significant litigation. I nevertheless accept there is a basis to depart from the time allowances in Schedule 3 because of the underlying complexity of the subject matter of the litigation, what was put in issue by the parties, and the way in which the litigation was conducted (including Dassault’s defaults) meant that the time required substantially exceeded that allocated under band C in accordance with r 14.6(3)(a).
[36] I agree with the general approach suggested in the submissions for Fujitsu. In relation to discovery and inspection I allow a doubling of the Schedule 3 amount and therefore allow a claim based on 26 rather than 13 days. In relation to step 33, preparation, I again roughly double the amount and award 26 days. I agree with the allowance for step 33A, bundle preparation, at 5 days given what would have been involved. For step 33B in relation to preparation for hearing I adopt the same approach and essentially double the allowance to allow 26 days.
[37] The Department’s claims for costs against the defendant can be calculated, and the amount awarded adjusted on that basis.
(ii)Settlement offers
[38] The Department seeks an uplift under r 14.6(3)(b)(v) on the basis that Fujitsu refused to accept reasonable settlement offers. The offers in question were:
(a)on 30 March 2023 to settle for $3.7 million, an amount above the judgment amount if interest is disregarded;
(b)an offer to settle a week before trial for $3.15 million, significantly lower than the amount ultimately awarded; and
(c)an offer to settle for $2.5 million made at the conclusion of the first week of the trial, following observations from the Court, well below the judgment amount.
[39] The Department emphasises that it made on-going efforts to resolve what was unnecessary and uneconomic litigation, and Fujitsu’s failure to meaningfully engage. Fujitsu relies on the analysis of uplifted costs for settlement offers set out The Law of
Costs New Zealand, and the decision of Katz J in Weaver & Anderson v HML Nominees Ltd & ors and the factors there identified.13
[40] I addressed the question of costs offers made by successful parties in Mainzeal Property and Construction Ltd (in liq) v Yan & Ors in the following way:14
[59] Offers made by successful plaintiffs are in a different category from offers made by unsuccessful defendants that exceed what the plaintiff is entitled to. The latter category is subject to separate rules in rr 14.10 and 14.11 which contemplate that a defendant offering more than the plaintiff is entitled to get costs from the point of the offer. That rationale does not arise in the rejection of offers made by the plaintiffs. A defendant who defends a proceeding is putting the plaintiff to the cost of it, and normally no increased costs are caused because the defendant does not accept an offer to settle for less than is claimed.
[60] The principle in r 14.6(3)(b)(v) recognises, however, there will be situations where the refusal to settle can demonstrate that the party is acting without reasonable justification, and causing unnecessary expense to the claiming party. It has a similar rationale to the other uplift grounds in r 14.6. A plaintiff may offer to accept less than it is entitled to try and convince an obdurate defendant not to put the parties to the cost of a trial, and the failure to accept such an offer may justify an uplift. Without seeking to circumscribe r 14.6(3)(b)(v) that seems to me what the rule is generally directed to.
[41] I remain of the view expressed in those paragraphs. In Weaver & Anderson v HML Nominees Ltd & ors Katz J identified a range of factors that may be relevant to the assessment.15 In the present case the offers that the plaintiffs made before trial were commercially sensible, but nevertheless still involved significant amounts being paid. Rejection of them simply involved Fujitsu not accepting it was liable, and exercising its right of access to the Court. I do not consider that rejecting either offer can fairly be said to involve obdurate behaviour that warrants an uplift. The second offer was materially lower than the judgment amount, but still involved a significant payment, and the offer was only made the week before trial. The third offer after the first week of trial was plainly influenced by an expression of concern by the Court about the potentially uneconomic character of the proceedings. It was at a
13 David Bullock and Tim Mullins The Law of Costs in New Zealand (LexisNexis, Wellington, 2022) at [3.9]–[3.12]; Weaver & Anderson v HML Nominees Ltd & ors [2016] NZHC 473.
14 Mainzeal Property and Construction Ltd (in liq) v Yan & Ors, above n 12, at [59]–[60]. See also
Lepionka & Company Investments Ltd v Gibson Sheat, above n 10, at [35].
15 Weaver & Anderson v HML Nominees Ltd & ors, above n 13, at [30].
significantly lower level. But that was only made in the first week of trial. Again, therefore, I do not think that a basis for an uplift under the rules is made out.
[42] I accept that there may well be a legitimate sense of frustration involved in the need for this litigation to go to trial. Given the participants were commercially sophisticated it is surprising that they were not able to find a way in which to resolve the dispute without court proceedings being necessary. But sophisticated commercial parties are entitled to access to the court just as much as anybody else, and such parties have a right to obtain the Court’s judgment on such matters. For these reasons I do not consider that the reasonably high threshold for an uplift is reached.
Department’s claims against Dassault
[43] The Department makes two related claims against Dassault notwithstanding that the Department advanced no claim against Dassault. The claims are based on the way in which Dassault conducted the proceedings which the Department says increased its costs. In particular:
(a)that Dassault’s failings in relation to discovery, including the failings already subject to an earlier judgment of the Court in relation to Dassault’s failure to retain relevant documentation, warrant a costs award;16 and
(b)that Dassault led prolix and unhelpful evidence at trial, again further increasing the Department’s costs.
[44] The Department seeks $88,250.00 being an allowance of 25 days at the band C rate in relation to discovery shortcomings, and $44,125.00 being an allowance of
12.5 days at the band C rate for the prolix evidence.
[45] Both claims are resisted by Dassault. They say these proceedings should be category B and not category C, a matter I address below. It also says that the relevant costs are already addressed by the Department’s claims against Fujitsu, and are
16 Chief Executive of the Department of Corrections v Fujitsu New Zealand Ltd [2023] NZHC 1900.
excessive given the uplifts already contemplated. It says that no costs should be awarded against it as no claims have been brought against it. It accepts that uplifted costs may be awarded against it for its discovery shortcomings, but otherwise resists the Department’s criticisms of its conduct in the proceedings. In terms of its evidence at trial it rejects the criticisms and says that its evidence was entirely appropriate in light of the issues at trial.
[46] I accept Dassault’s argument in one key respect. It is a central aspect of the costs’ regime in pt 14 that the party awarded costs has succeeded against the party who is to pay costs. That is reflected in r 14.2(1)(a), and the way in which the costs regime is structured. Here the Department seeks costs against Dassault notwithstanding that there is no interlocutory application which it made against Dassault which has been successful, and in relation to its preparations for trial notwithstanding that it made no claims against Dassault. Dassault was only involved in the proceeding as a consequence of the third-party claims made against it by Fujitsu.
[47] I accept that there may be some special cases where, notwithstanding that basic structure of the costs regime, it may be possible for the Court to award costs against a party to the litigation in favour of another party when there are no actual proceedings between them. This would likely involve the discretion under r 14.1. But I do not consider this is such a case. Here Dassault’s defaults are properly addressed in the costs award in Fujitsu’s favour against Dassault. To the extent that Dassault’s defaults have led to the Department incurring higher legal expenditure, that may justify the Department receiving upwards adjustments to its costs award — such as the adjustment I have made to its discovery awards referred to in [35] above — and this may be relevant to Fujitsu’s awards against Dassault. But I see no proper basis for an award directly in favour of the Department against Dassault in circumstances where there has never been a proceeding or application by the Department against Dassault.
[48] There is then a final category where the Department seeks costs against Dassault. This relate to interlocutory applications that were advanced in the proceedings between the Department and Dassault. There are three in total. There is a proper basis to consider an award associated with such applications between the
parties. But Dassault opposes such awards on the basis there was an equal measure of success between the Department and Dassault in relation to them.
[49] Once again I apply the scheme of the rules and conclude that no costs should be awarded in the Department’s favour. Costs are awarded when an interlocutory application is determined by the Court. The usual approach is that the successful party is awarded costs. Under r 14.8 costs of interlocutory applications must be fixed in accordance with the rules when the application is determined unless there are special reasons. An example is the Court’s decision on Fujitsu’s application to strike out Dassault’s defence where costs were reserved given Dassault’s significant failures and their capacity to effect the substantive claims.17 That did not occur on these interlocutory applications because the Court did not make any decision on the applications. Rather they were resolved by the parties (or at least I was not directed to any relevant interlocutory decisions). If parties wish the Court to make an order reserving costs for later determination, or ordering that they are to be “costs in the cause”, then r 14.8 can then be applied. But in the absence of such orders, and bearing in mind the agreement reached between the parties, I do not award costs to the Department on the interlocutory applications.
Fujitsu’s claim against Dassault
[50] Fujitsu has succeeded, in part, on its claims against Dassault. It seeks costs. In the judgment I indicated a preliminary view that Fujitsu should be awarded costs against Dassault but calculated on the basis that only half the trial was attributable to Fujitsu’s claim against Dassault. A series of issues have now been raised in the memoranda filed by the parties.
(i)Fujitsu’s claims to recover costs awarded against it
[51] First Fujitsu claims that its costs in defending the claim brought by the Department against it should be paid by Dassault to it. Dassault opposes.
17 Chief Executive of the Department of Corrections v Fujitsu New Zealand Ltd, above n 15, at [30].
[52] There is nothing in pt 14 that contemplates such an award. I agree with Dassault that the scheme of the rules generally does not support this approach. The rules contemplate the plaintiff being entitled to an award for the steps of the proceeding up to trial in relation to its claim, and the defendant being entitled to an award against the third party for its steps up to trial for its successful claim.18 The costs of the trial could then be allocated on an apportionment basis depending on how much of the trial was attributed to the plaintiff’s claim against the defendant, and how much were attributable to the defendant’s claim against the third party. That seems to me to be the general scheme of the costs rules.
[53] There is nothing in the above analysis that suggests that there is an indemnity by the third party of the defendant in relation to costs. This is a principle that has been applied in other jurisdictions.19 But I nevertheless agree with the view that under the New Zealand rules “… if the plaintiff succeeds and has costs awarded against the defendant, then the defendant might be able to claim those costs against the third party as a matter of costs …”.20 Such an award in the defendant’s favour would likely involve application of the discretion in r 14.1. An example may be when the defendant rightly joins a third party where the plaintiff is ultimately unsuccessful where it may be that the plaintiff is expected to bear the costs of the third party in the exercise of the discretion in r 14.1.21
[54] I see no reason to depart from the basic structure described in [52] above given the facts of this case, however. The Department succeeded against Fujitsu under breach of contractual warranty claims. Dassault provided no such warranties to Fujitsu. Rather, in its contracts, it largely excluded liability. So Dassault cannot be said to have caused Fujitsu’s liability. Moreover it was Fujitsu who decided to defend the claim brought by the Department. Fujitsu also benefits from an appropriate costs award by an award of costs representing the steps associated with its claims against
18 Putting to one side any issue about partial success.
19 See G E Dal Pont Law of Costs (5th ed, Lexis Nexis, Australia, 2021) at [11.24].
20 David Bullock and Tim Mullins The Law of Costs in New Zealand (LexisNexis, Wellington, 2022) at [2.31]. See also Jessica Gorman & Ors McGechan on Procedure (looseleaf ed, Brookers, updated to 16 November 2023) at [HR pt 14].
21 See Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [22]; Money World New Zealand 2000 Ltd v KVB Kunlun New Zealand Ltd HC Auckland CIV 2003- 404-2542, 23 September 2005.
Dassault, and the costs of trial to the extent that those costs reflected Fujitsu’s third party claim against Dassault.
[55] The overall outcome in terms of costs on this approach also seems fair. The Department is awarded a full set of costs in relation to the proceedings against Fujitsu. Fujitsu is awarded less than a full set of costs, which are discounted to represent an award associated with approximately half the time of trial. Dassault, as an unsuccessful party, pays that partial award to Fujitsu. Substantively there is then a costs award in the Department’s favour which is partly met by Fujitsu and partly met by Dassault.
[56] For these reasons I confirm the preliminary view expressed in the judgment, and reject the argument that Dassault must indemnify Fujitsu for the costs awarded against Fujitsu in favour of the Department.
(ii)Categorisation
[57] In terms of Fujitsu’s scheduled costs claim against Dassault, Dassault argues that these proceedings should be categorised as category 2 proceedings, and not category 3 proceedings, as the parties had agreed to category 2 at the outset, and these proceedings remained appropriately categorised as category 2.
[58] There is an ability to re-categorise proceedings under r 14.3(2) if there are special reasons. I consider that there are such reasons in the present case. First, the proceedings seem to me to clearly fall into category 3 given the nature and complexity of them. Two of the three parties now agree that these proceedings are category 3, and all three parties engaged senior counsel reflecting the complexity of the case. Secondly, the primary purpose of early categorisation is to assist the parties in calculating their potential exposure to costs as a proceeding goes forward.22 Here, however, the manner in which Dassault conducted the proceeding, both in terms of the complexity of the case it advanced, and its failure to fully comply with its obligations, suggest an approach that involved it resisting liability irrespective of the cost of the
22 Dovey Aviation Consulting Ltd v The Attorney-General of New Zealand [2021] NZHC 1224 at [9]; Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZCA 544 at [29].
proceeding. It would be unfair to Fujitsu to not have the proceedings correctly categorised given the complexities caused by Dassault’s approach. In those circumstances special reasons exist to re-categorise the proceeding to the more accurate category.
(iii)Schedule 3 claims
[59]I now address the more specific disputes about the application of schedule 3.
[60] As I suggested in the judgment, in my view Fujitsu is entitled to schedule costs for its proceeding against Dassault through to trial. But for the trial itself, and for the preparation of the trial, costs should be calculated on the basis that only half the trial was attributable to Fujitsu’s claim against Dassault. On that basis, and subject to the adjustments set out below, costs are allowed on the basis claimed in appendix A of the memorandum of counsel for Fujitsu dated 22 February 2024. But the claims for steps 33-35 should be recalculated to be based on half the trial being attributable to the third party claim.
[61] I accept Fujitsu’s argument that it should be treated as a successful party for the purposes of the costs calculations. Whilst it only succeeded in relation to one head of loss claimed, this was still a substantial award, and “success on more limited terms is still success”.23 If Dassault had paid, or made an open offer that was higher than the amount Fujitsu was ultimately awarded the position would be different in accordance with r 14.11. But Dassault’s offers were well short of the amount awarded. I accordingly agree that Fujitsu is entitled to an award of costs without any deduction for only partial success. This represents the costs award that would have been made if Fujitsu had brought separate proceedings against Dassault.
[62] I also accept that there should be uplifts for steps 20, 21 and step 33 involving doubling the allowance for those steps. For step 33A the allowance should be 2.5 days. For step 33B the allowance should be doubled, but for the reasons defined above the starting point is based on half the number of trial days. The reasons for these
23 Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379 at [26].
determinations are essentially the same as I outlined in [33]–[36] above, and involve the application of r 14.6(3)(a).
[63] A question then arises whether there should be any further uplift because of Dassault’s defaults as identified in the Court’s earlier decision declining to strike out Dassault’s defence.24 This involves the application of r 14.6(3)(b)(i). There are two aspects of this that may justify such a further uplift. The first is Dassault’s failure to implement a litigation hold, and the potential destruction of evidence as a consequence. The second is an apparent failure of Dassault to explain its conduct. No further explanation was provided to the Court at trial better explaining why the documents were destroyed, and when evidence was given by Dassault’s witnesses at trial some of the earlier explanations did not seem to be borne out. In those circumstances a further uplift is warranted. Having said that, it is notable that significant adverse documents were nevertheless discovered by Dassault. I also accept that an extensive effort was engaged in by Dassault’s solicitors to rectify the position. This is not a case where indemnity costs in relation to these particular steps would be appropriate. Some increase of the costs awarded should nevertheless be granted, however. In the circumstances I award a further increase of the costs awarded for steps 21 and 24-27 of 25 per cent.
[64] There are then Dassault’s arguments that adjustments to Fujitsu’s claims should be made as set in paragraph 4 of Dassault’s memorandum of 7 March 2023. In particular:
(a)I agree that Dassault is entitled to the costs of Fujitsu’s amended pleadings, and with the mechanism for doing so advanced by Dassault in paragraph 4.1(a)(ii) of that memorandum;
(b)I do not accept Dassault’s criticism in relation to the case management claims. It may well be that Fujitsu had little input into the case management memoranda, but such costs were necessary costs on the third party claim had the claim been advanced in completely separate proceedings. They are allowed as claimed;
24 Chief Executive of the Department of Corrections v Fujitsu New Zealand Ltd [2023] NZHC 1900.
(c)I have already dealt with the discovery and other steps above;
(d)In relation to the interlocutory applications I agree that Dassault should pay the costs of the application heard on 19 July 2023 on the basis described above, but otherwise no costs should be awarded in relation to the applications heard on 7 June 2022 and 7 September 2023, essentially for the reasons identified at [49] above.
[65] I do not agree with Dassault’s claim for the costs of the interlocutory applications heard on 7 June and 7 September which relate to the discovery issues.
[66] As to the disbursements, I allow the filing fees, and 50 per cent of the disbursements for Kathiresan, Gould, Horwood and Clarke. Given the failure of the relevant causes of action I disallow the disbursements claimed for McKenzie and Rothnie.
Conclusion and summary
[67] I have attempted to address all the matters that have been raised in the numerous memoranda filed by the parties. If there is anything I have overlooked I give leave to file a very brief memoranda to address it, although if I have overlooked anything I would have thought the parties can resolve it in light of the principles I have outlined in this judgment.
[68]For the reasons above I make the following determinations:
(a)Fujitsu’s application to recall is dismissed and Dassault is awarded costs of that application on a 3B basis;
(b)The judgment sums and interest awards are made in accordance with
[26] and [28] above.
(c)The Department is awarded costs against Fujitsu on the basis outlined in [31] and [35] above.
(d)Fujitsu is awarded costs against Dassault on the basis outlined at [58] and [60]–[64] above.
Cooke J
Solicitors:
Bell Gully, Wellington for the Plaintiff
Wigley and Company, Wellington for the Defendant MinterEllisonRuddWatts, Auckland for the Third Party
0
16
0