Craig v Social Media Consultants Ltd
[2017] NZHC 1613
•12 July 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2017-404-000102
CIV-2017-404-000795 [2017] NZHC 1613
UNDER Copyright Act 1994 BETWEEN
COLIN GRAEME CRAIG Appellant
AND
SOCIAL MEDIA CONSULTANTS LIMITED
First Respondent
JORDAN HENRY WILLIAMS Second Respondent
On the papers Appearances:
K Glover and L Bercovitch for the Appellant
B Henry and C Foster for the First Respondent
P McKnight for the Second RespondentJudgment:
12 July 2017
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Wednesday, 12 July 2017 at 4:30 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
K Glover, Shortland Chambers, Auckland
B Henry, Auckland
P McKnight, WellingtonChapman Tripp, Auckland
Shanahans, Family and Property Law, Auckland
CRAIG v SOCIAL MEDIA CONSULTANTS LTD& ANOR[2017] NZHC 1613 [12 July 2017]
[1] On 14 June 2017, I issued judgment reinstating the plaintiff’s claim against the defendants for breach of copyright in a poem entitled “Two of Me”. I overturned Judge Sharp’s decision in the District Court granting summary judgment to the second defendant, Mr Williams, and striking out the claim against both defendants.
[2] I held that Mr Craig could not be said to have accepted Mr Williams’ affirmative defence of fair dealing by failing to file a reply. Therefore summary judgment was not warranted. Further, that Mr Craig’s claim was not vexatious or an abuse of process so as to justify striking out the claim. Although the remedies sought in his statement of claim are limited in value, he is entitled to a hearing in these proceedings.
[3] The plaintiff now seeks costs on the basis of the principle that costs usually follow the event. Costs are sought on the substantive appeal on a standard 2B basis. This includes a claim for second counsel. Further, costs are sought on the appeal against costs on a mixed 2B and 2A basis, and on preparation for this costs appeal on a 2B basis. Costs claimed amount to $23,415 plus disbursements of $3,294.60.
[4] The defendants submit that this is a rare situation in which the Court should exercise its discretion under r 14.1 instead of applying the standard rules. The Court should either reduce costs or reserve them for determination by the trial judge in order to achieve ultimate justice between the parties. They submit:
(a) There are special circumstances as the value of any remedy sought by the plaintiff is small relative to the costs the defendants will incur defending the proceedings. They point to the plaintiff’s statement of claim, which anticipates that, if successful, any award of damages will not exceed $20,000, compared to the total costs and disbursements sought on this appeal alone of $24,472. The Court can take into account the low value or significance of issues or interests at stake under r 14.7(b) and (c).
(b)The defendants have a strong defence to the claim given the poem was published on a political news blog for its political significance not its artistic merit.
(c) The plaintiff is motivated to create financial hardship for the comparatively less wealthy respondents, and to protect his reputation.
(d)Summary judgment in the District Court decision arose solely because Mr Craig failed to file a reply. Mr Williams should not be penalised by an award of costs when the root cause was Mr Craig’s failure.
[5] Further, the defendants submit that the claim for costs is excessive and any award should be reduced to reflect:
(a) That it is not appropriate to award costs for second counsel, for steps taken in respect of the common bundle, for the step of filing the substantive appeal, for the case management conference or for “costs on costs”.
(b) That the courier fees and photocopying fees are excessive.
Governing principles
[6] The starting point is the discretion afforded to the Courts under r 14.1 of the
High Court Rules 2016.
14.1 Costs at discretion of court
(1) All matters are at the discretion of the court if they relate to costs–
(a) of a proceeding; or
(b) incidental to a proceeding; or
(c) of a step in a proceeding.
(2) Rules 14.2 to 14.10 are subject to subclause (1).
(3) The provisions of any Act override subclauses (1) and (2).
[7] However, the Court’s discretion is not unfettered, but qualified by rr 14.2–
14.10, and exercisable only in situations not contemplated by those specific rules. It is well established that any departure should be rare and requires reasons.1 The rules specify that the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds according to the daily recovery rates specified. The court may refuse to make an order for costs or may reduce the costs otherwise payable in the instances set out in r 14.7. This relevantly includes where:
(b) the property or interests at stake in the proceeding were of exceptionally low value; or
(c) the issues at stake were of little significance; or
…
(e) the party claiming costs has contributed unnecessarily to the time or expense of the proceeding or step in the proceeding by—
(i) failing to comply with these rules or a direction of the court;
or
(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or
…
(f) some other reason exists that justifies the court refusing costs or reducing costs despite the principle that the determination of costs should be predictable and expeditious.
[8] I first deal with the arguments raised by the defendants in favour of reducing the quantum of appropriate costs. I then turn to the question of reserving costs until the resolution of the substantive appeal.
Reduction in quantum of costs
[9] First, in respect of the argument advanced by Mr Williams that Mr Craig’s failure to file a reply in the District Court was the “root cause” of the appeal on which he now seeks costs, I am not persuaded that this warrants a reduction in costs.
The relevant cause of the appeal was not that Mr Craig failed to file a reply to the
1 Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA) at [19]; Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt Ltd) (2002) 16 PRNZ 662 at [27]; Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7]–[8].
affirmative defence pleaded by Mr Williams, but that the District Court Judge treated this fact as determinative of the application for summary judgment. The appeal was successful on the grounds that the Judge had erred in her application of the law. This will not limit the costs the defendants are required to pay, as the Supreme Court held in Manukau Golf Club v Shoye Venture Ltd:2
In virtually every case where an appeal succeeds, the appellate court has formed the view that the Judge below went wrong in some way or other. For the purposes of costs in the appellate court, it does not matter why the Judge went wrong. The losing party on appeal almost always has to pay costs to the winning party — and in that sense “pays for” the error (as found) of the judge below. That is the consequence of a respondent fighting to maintain its win and supporting the findings of the judge below. If the respondent accepts the judge below was wrong, then it should settle with the appellant or not seek to defend the appeal. In those circumstances, it would avoid liability for costs.
[10] Nor is it relevant that the defendants consider they have a strong defence to the claim. How close an unsuccessful defendant comes to succeeding is not generally relevant to costs orders. The strength of the defence is relevant to the substantive case, not to costs on an interlocutory application.
[11] However, in respect of the sums claimed, I do not consider that an award of costs for second counsel is appropriate. This is not a particularly complex example of a category 2 case. Accordingly, on the analysis in Nomoi Holdings Ltd v Elders Pastoral Holdings Ltd I do not consider certification for second counsel is justified.3
It also appears that the application to appeal was filed by Mr Craig himself rather
than with the assistance of counsel. Litigants in person are not entitled to costs. If Mr Craig did not, in fact, have representation for that step of the proceeding he is not entitled to costs on that step.
Reserving costs
[12] The defendants submit that it is appropriate to reserve costs for consideration after the final determination of the matter. In respect of interlocutory applications,
r 14.8 provides that costs on interlocutory applications should be treated separately
2 Manukau Golf Club Inc v Shoye Venture Ltd, above n 1, at [13].
3 Nomoi Holdings Ltd v Elders Pastoral Holdings Ltd (2001) 15 PRNZ 155 (HC) at [17]–[22].
from substantive proceedings and not reserved unless there are special reasons to the contrary:
14.8 Costs on interlocutory applications
(1) Costs on an opposed interlocutory application, unless there are special reasons to the contrary, —
(a) must be fixed in accordance with these rules when the application is determined; and
(b) become payable when they are fixed.
…
(3) This rule does not apply to an application for summary judgment.
[13] This rule recognises that the merits of interlocutory applications and the merits of substantive proceedings are different matters.4 Further, it serves to disincentive unnecessary procedural disputes. The rule and its justification clearly apply to strike out proceedings. Success in a final determination by no means indicates that an application to strike out was properly brought or should have succeeded.
[14] By contrast, the exclusion in r 14.8(3) preserves the court’s general practice of reserving costs on a plaintiff’s unsuccessful application for summary judgment. This approach recognises that costs for summary judgment may be best settled when the result of litigation is known.5 However, the courts have generally approached costs for summary judgment differently when the application is brought by the defendant rather than the plaintiff.6 A plaintiff’s application for summary judgment, even if unsuccessful, can have considerable benefits in relation to the overall disposal of the litigation; this is not necessarily the case where a defendant seeks summary judgment.7 Indeed, in this instance the application by the defendants has had no positive impact on the litigation. It is now in the same place that it would
have been had the application not been made.
4 Chapman v Badon Ltd [2010] NZCA 613 at [12].
5 NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA) at 406.
6 Schmidt v Registrar-General of Land [2015] NZHC 2438, (2015) PRNZ 794 at [19]–[21].
7 Suharnan v Suviken Ltd (in liq) [2013] NZHC 586 at [13]–[14].
[15] Ordinarily, therefore, the plaintiffs would be entitled to costs now according to the schedule provided subject to my reservations listed above. However, r 14.8 provides an exception to the general rule that costs will be awarded immediately following the interlocutory application where there are special reasons to the contrary.
Value of interests at stake
[16] The defendants submit that the property or interests, the subject of Mr Craig’s claim, are of exceptionally low value and the issues at stake are of little significance. These are grounds on which the court may refuse to make an order for costs or reduce the costs otherwise payable under r 14.7(b) and (c).
[17] On their plain reading these subrules provide a mechanism by which the Court can reduce costs where, for example, costs might significantly outweigh the value of the litigation. Cases in which a party is awarded nominal damages may fall within the rule. A plaintiff who recovers only nominal damages may not necessarily
be regarded as “successful”, warranting a reduction in costs.8
[18] This rule has usually been invoked where a party has claimed significant damages, but received only nominal damages. The Court of Appeal has held that the proper question lies “in determining who in reality has been the successful party”.9
The situation currently before me is slightly different. The defendants submit that Mr Craig’s application seeks remedies of such minimal value that any finding for the plaintiff will fall within the rule. In support of this proposition they note that Mr Craig’s statement of claim seeks a maximum of $20,000 in damages, less than the costs sought on the current appeal alone.
[19] The fact that the award sought is of minimal monetary value will not necessarily be decisive; as Tipping J pointed out in Waihi Mines, “vindication of a legal right without damages may carry an award of costs”.10 However, in some
instances it might be appropriate for costs to be reduced where the plaintiff succeeds
8 Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries [1951] 1 All ER 873; Waihi Mines
Ltd v Auag Resources Ltd (1999) 13 PRNZ 372 (CA).
9 Waihi Mines Ltd v Auag Resources Ltd, above n 8, at [5].
10 Waihi Mine Ltd v Auag Resources, above n 8, at [6].
in full on an application, but the issues or value at stake are very low. This approach would recognise the “overall principle” recognised by Chambers J in Curly Ltd v Harvey Norman Stores (NZ) Pty Ltd “that costs should be proportionate to the issues and amount at stake”.11 That principle applies to costs on interlocutory applications as much as it does to the substantive hearing.
[20] The question must be ultimately a matter of discretion for the Judge upon an assessment of all relevant circumstances. However, to some extent it involves an evaluation of the merits of the claim, or at least the merits of the issues at stake. This will not be based only on the monetary value of the claim or of any award. The defendants point to the fact that the damages claimed are less than costs. This may be a relevant factor to any ultimate evaluation, but I do not consider that costs can be appropriately reduced on that basis at this stage without consideration of the merits of the plaintiff’s claim. It is thus not an evaluation that it would be appropriate to undertake at this stage of the proceeding. Therefore while it may be appropriate to reduce costs on this application under r 14.7(b)–(c), any reduction cannot be assessed at this stage. This provides a special reason under r 14.8 warranting the reservation of costs.
[21] For that reason only I consider there are special reasons that make it appropriate to reserve costs until the conclusion of the substantive hearing. It would be premature to decide the issue of costs now.
[22] I direct that the question of costs on Mr Craig’s appeal against summary
judgment and strike out be reserved for determination as part of the final determination of costs at the conclusion of the proceeding.
Woolford J
11 Curly Ltd v Harvey Norman Stores (NZ) Pty Ltd HC Auckland M29/IM02, 24 May 2002 at [19].
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