Conbrio Technology Group Limited v Schwarz

[2015] NZHC 2977

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-1281 [2015] NZHC 2977

BETWEEN

CONBRIO TECHNOLOGY GROUP

LIMITED Plaintiff

AND

STEVEN SCHWARZ First Defendant

AND

ETHERLAB LIMITED Second Defendant

On the papers
Judgment:	30 November 2015

JUDGMENT OF THOMAS J [COSTS]

This judgment was delivered by me on 30 November 2015 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:………………………….

CONBRIO TECHNOLOGY GROUP LIMITED v SCHWARZ [2015] NZHC 2977 [30 November 2015]

Background

[1]      The  first  defendant  sold  a company related  to  him  to the plaintiff for a substantial sum and entered into restraint of trade and confidentiality covenants.  The plaintiff claimed these were being breached with serious consequences for the business.

[2]      The plaintiff sought an interim injunction and related orders against the first and  second  defendants.    The  application  was  resolved  by  way  of  orders  and directions by consent.

[3]      The plaintiff now seeks costs on the interim injunction application as follows:

Interlocutory application	2 days	Category C	$3,980
Memorandum regarding application	0.4 days	Category B	$796
Call over x 2	0.4 days	Category B	$796
Joint memorandum (half share)	0.2 days	Category B	$398
Total	$3,184

[4]      The plaintiff also seeks an uplift of 50 per cent to reflect the fact that the application was necessary due to the first defendant’s responses in the letters being, in  Mr  Glover’s  words,  “less  than  candid  (e.g.  his  denial  of  approaching  other Conbrio employees when Mike Patel was acting as Etherlab’s accountant).”

[5]      That brings the amount sought to $8,955.  A disbursement of $500 is also sought for the filing fee.

[6]      The defendants oppose the plaintiff’s request for costs according to a higher band or for any uplift.   The defendants submit that costs payable to the plaintiff should be calculated as follows:

Interlocutory application	0.6 days	Category B	$1,194
Memorandum regarding application	0.4 days	Category B	$796
Call over x 2	0.4 days	Category B	$796
Joint memorandum (half share)	0.2 days	Category B	$398
Total	$3,184

[7]      Mr Vautier, for the defendants, says that an offer to pay 2B costs was made to the plaintiff on 25 June 2015, prior to the consent orders being made.

[8]      In his submission, Band B applies.  He submits that the plaintiff’s request that costs of the application be fixed according to Band C is not substantiated because the plaintiff has provided no evidence as to the time spent on the application or any evidence that a comparatively large amount of time was reasonably required.

[9]      Additionally, Mr Vautier submits there is no evidence that the defendants have conducted themselves unreasonably since the proceedings were commenced such that an order for increased costs can be made.  Rather, in his submission, the defendants agreed to the consent orders at an early stage and even sought to fix costs by consent.

Principles

[10]     The applicable principles under the High Court Rules are as follows: (a)       costs are ultimately within the discretion of the Court;1

(b)      the party who fails on an interlocutory application should pay the

costs involved;2

1      High Court Rules, r 14.1.

2      High Court Rules, r 14.2(a).

(c)      an award of costs should reflect the complexity and significance of the proceeding;3

(d)an appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable;4

(e)      so far as possible, the determination of costs should be predictable and expeditious;5 and

(f)      increased   costs   may   be   justified   under   r   14.6   in   identified circumstances where the Court is justified in making an order for increased costs, despite the principle that the determination of costs should be predictable and expeditious.

Analysis

[11]     Rule 14.2(c) holds that costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the interlocutory application.  Rule 14.5 provides:

14.5  Determination of reasonable time

(1)     For the purposes of rule 14.2(c), a reasonable time for a step is—

(a)     the time specified for it in Schedule 3; or

(b)     a time determined by analogy with that schedule, if Schedule 3 does not apply; or

(c)     the time assessed as likely to be required for the particular step, if no analogy can usefully be made.

(2)     A  determination  of  what  is  a  reasonable  time  for  a  step  under subclause (1) must be made by reference—

(a)     to  band  A,  if  a  comparatively  small  amount  of  time  is considered reasonable; or

(b)     to band B, if a normal amount of time is considered reasonable;

or

3      High Court Rules, r 14.2(b).

4      High Court Rules, r 14.2(d).

5      High Court Rules, r 14.2(g).

(c)     to band C, if a comparatively large amount of time for the particular step is considered reasonable.

[12]     The plaintiff seeks Band C categorisation.  The Court of Appeal has said, if a party wants other than Band B, that party must demonstrate why a normal time for that particular step would be insufficient.6     The plaintiff has not done so.  The only ground for a Band C categorisation appears to be based on “the work required on the application and evidence, which will be evident from the court file”.   This is not sufficient  and  it  is  for  the  plaintiff  (being  the  party  arguing  for  Band  C categorisation) to substantiate the claimed costs.

[13]     Accordingly, I accept the submission for the defendants that the plaintiff has not shown that Band B should not apply.

[14]     Turning to the issue of increased costs, the plaintiff submits that an uplift of

50 per cent should be made to reflect the first defendant’s response in the letters to

the allegations made against him.

[15]     The  position  on  increased  costs  is  well  settled.  Increased  costs  may  be ordered where there is failure by the paying party to act reasonably.7    The focus, however,  is  on  unreasonable conduct  after the  proceeding was  commenced,  not earlier conduct.8   In Commissioner of Inland Revenue v Chesterfields Preschools Ltd, the Court of Appeal said that the Court must consider the extent to which any failure to act reasonably contributed to the time or expense of the proceeding.  The Court stated,  “[o]nly to  that  extent  could  any percentage  uplift  from  scale  have  been justified”.9    I accept that there is no evidence to suggest that the defendants have conducted themselves unreasonably and, to the contrary, the defendants, in agreeing to the consent orders at an early stage and seeking to fix costs by consent, have acted

in an expeditious way.

6      Paper  Reclaim  Ltd  v  Aotearoa  International Ltd  [2007] NZCA 544 at [35] confirmed in

Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400 at [161].

7      Bradbury v Westpac Corp [2009] 3 NZLR 400 (CA) at [27].

8      Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160].

9 Above n 6, at [165].

Order

[16]     I order that the defendants pay to the plaintiff costs in the sum of $3,18410

and disbursements as fixed by the Registrar.

Thomas J

10     Noting that prior to 30 June 2015, the appropriate daily recovery rate for category two of proceedings is $1,990.