Creative Development Solutions Limited v Chorus New Zealand Limited

[2020] NZHC 200

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-509

[2020] NZHC 200

BETWEEN

CREATIVE DEVELOPMENT SOLUTIONS LIMITED
Plaintiff

AND

CHORUS NEW ZEALAND LIMITED

Defendant

On papers
Judgment:	18 February 2020

JUDGMENT OF DOBSON J

[Costs]

[1]    In my substantive judgment in this proceeding,1 I provided my provisional determination on costs in the following terms:

[240]    For Chorus, Mr Lott and others engaged in grossly misleading flattery to encourage MDC to contract with Chorus, during the period in which Chorus was under the impression that MDC had substantial funding (“ [Redacted] ”) to commit to the cost of extending infrastructure.

[241]    A consequence of Chorus’s flattery is that Creative would have assessed its prospects for these proceedings by treating Chorus as having confirmed its own belief in the substantial value to Chorus of Creative’s intellectual property. Because I have found that Chorus was not genuine in the assessments it conveyed to Creative of the value of Creative’s intellectual property at the time, those expressions of view have not been determinative in assessing Creative’s causes of action. However, they provide a substantial measure of justification for Creative to embark on proceedings, articulating claims in the terms that it has.

1      Creative Development Solutions Ltd v Chorus New Zealand Ltd [2019] NZHC 2959.

CREATIVE DEVELOPMENT SOLUTIONS LTD v CHORUS NEW ZEALAND LTD [2020] NZHC 200

[18 February 2020]

[242]    Chorus might argue that such misapprehensions as Creative may have been given by Chorus’s highly complimentary assessments during negotiations could not justify continuation of the proceedings after discovery had been completed. However, that is not a sufficient answer. There remained a measure of justification for the tone of moral indignation that infused all of Creative’s case. Whilst it is not enough to overcome the various deficiencies I have found which preclude it succeeding, the misleadingly flattering tone of approval of Creative’s intellectual property throughout a period when Chorus’s genuine view was negative and dismissive is a most unusual dynamic that I treat as dominating the competing positions on costs, given the outcome.

[243]    I have decided that the appropriate outcome is that there be no order for costs and each party is to bear their own.

[2]    I acknowledged that this decision on costs could be revisited, in the event that any Calderbank letter had been issued.

[3]    By memorandum dated 19 December 2019, counsel for the defendant (Chorus) have advised that Chorus had indeed provided a Calderbank letter to the solicitor for the plaintiff (CDS), and a copy of that letter was annexed. In reliance on the Calderbank offer, Chorus has now requested that I reconsider the view expressed on the assumption that none had been provided.

[4]    Chorus has sought costs on a 3B basis from 28 June 2019, being the date on which the initial offer in the Calderbank letter dated 12 June 2019 expired. In addition, Chorus seeks increased costs, essentially on the ground that the Calderbank offer had been rejected without reasonable justification.

[5]    In a memorandum in response dated 3 February 2020, CDS’s solicitor opposes any order for costs. Mr Wigley has submitted that the terms of the Calderbank offer are not sufficient to overcome the unusual circumstances alluded to in my provisional ruling, which circumstances arguably remain sufficient to disentitle Chorus to the costs they would otherwise be entitled to as a successful defendant.

[6]CDS has filed an appeal to the Court of Appeal.

[7]    The terms of the Calderbank letter, which was issued with no admission of liability on Chorus’s part, offered $750,000 in full and final settlement if settlement was reached by 28 June 2019. That date was nearly two weeks after CDS was due to

serve its briefs of evidence, so would enable CDS to assess the offer in light of the relatively extensive reasons cited by Chorus for maintaining its denial of liability. A second aspect of the offer was to pay $500,000 in full and final settlement if settlement was not reached by 28 June 2019, but was reached by 2 August 2019. That deadline was shortly after Chorus was then due to serve its briefs of evidence by 29 July 2019.

[8]    The analysis in the Calderbank letter of reasons why CDS’s causes of action would fail was, to a very substantial extent, upheld in my judgment. Acceptance of either offer would have produced a substantially better outcome for CDS than has resulted from my substantive judgment. In the absence of the finding of misleading flattery as referred to in [240] and [241] of my substantive judgment, the Calderbank offer would certainly have supported a claim for costs according to 3B scale, and might well have also justified a claim to increased costs.

[9]    However, I am left to assess the relative weight that should be given to my finding of misleading flattery, as against what would otherwise be the appropriate response in favour of a successful defendant having conveyed a Calderbank offer in the terms that I am now advised of.

[10]   Reflecting on the parties’ competing positions in light of the matters now raised in the latest exchange of memoranda, I am satisfied that a responsible plaintiff in CDS’s position, notwithstanding its annoyance at the misleading flattery Chorus had subjected it to, would have compromised its claims, at least after consideration of Chorus’s briefs, if not by the deadline for acceptance of the first Chorus offer.

[11]   I consider the appropriate weighting of these various considerations results in a reduced entitlement for Chorus to have an award of costs in its favour of one half of the costs on a 3B basis sought from 28 June 2019. I disallow any claim for increased costs.

[12]I also direct that Chorus is entitled to one half of the disbursements properly

incurred after 28 June 2019. If the quantum of such disbursements is not agreed, then they are in the first instance to be referred to the Registrar.

Dobson J

Solicitors:

Wigley and Company, Wellington for plaintiff Chapman Tripp, Wellington for defendant