Flujo Holdings Pty Limited v Merisant Company

[2017] NZHC 2069

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-1019 [2017] NZHC 2069

UNDER

Trade Marks Act 2002

UNDER

Fair Trading Act 1986

BETWEEN

FLUJO HOLDINGS PTY LIMITED Plaintiff

AND

MERISANT COMPANY First Defendant

SUGAR AUSTRALIA PTY LIMITED Second Defendant

NEW ZEALAND SUGAR COMPANY LIMITED

Third Defendant

Hearing:	On the papers
Counsel:	DL Marriott for plaintiff CL Elliott QC and JB Rutter for defendants
Judgment:	28 August 2017

JUDGMENT OF FITZGERALD J [As to costs]

This judgment was delivered by me on 28 August 2017 at 4 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Harrison Stone, Auckland (G Stone) Kengsington Swan, Auckland

Flujo Holdings Pty Limited v Merisant Company [2017] NZHC 2069 [28 August 2017]

Introduction

[1]      In my judgment dated 18 July 2017, I declined Merisant’s application to vary a notice of discontinuance and for increased or indemnity costs in respect of the entirety  of  Flujo’s  discontinued  substantive  proceedings.1     I  instead  awarded Merisant costs on a 2B basis, save for a 40 per cent contribution to the actual costs incurred by Merisant in the immediate lead up to the scheduled substantive hearing.

[2]      The parties now disagree as to costs in respect of Merisant’s applications. Memoranda have been filed.   Flujo says that it was (very largely) successful in opposing the applications, such that costs should follow the event in the ordinary way.   Merisant says that as Flujo was ordered to pay 40 per cent of Merisant’s actual costs incurred in the immediate lead up to the hearing, its costs application was successful in a meaningful and not insubstantial way.   In those circumstances, Merisant says that an appropriate outcome is for costs to lie where they fall.

[3]      Flujo also challenges certain steps of the costs claimed by Merisant in respect of the discontinued substantive proceedings.

Background

[4]      My  18  July  2017  judgment  details  the  background  to  the  substantive proceedings and Merisant’s applications.   In short, Flujo commenced proceedings against Merisant, claiming that Merisant was passing off Flujo’s packaging of artificial-sweetener products.  The substantive fixture was due to commence before me on 1 May 2017.  But on 27 April 2017, Flujo sought an adjournment of the trial. Wylie J declined to grant the adjournment.   Flujo filed a notice of discontinuance shortly thereafter.

[5]      On 12 June 2017, I heard Merisant’s applications to vary Flujo’s notice of discontinuance  and   for  indemnity  or  increased  costs.     Flujo  opposed  both applications.

[6]      As noted above, my 18 July judgment found Merisant’s applications to be unsuccessful, save that I allowed Merisant a 40 per cent contribution to its actual costs incurred in the lead up to the scheduled substantive hearing.

[7]      In respect of Merisant’s applications, I indicated a provisional view that Flujo was the successful party and so would be entitled to costs on a 2B basis.  However, I invited counsel to file memoranda if the parties were unable to agree.

Submissions

[8]      Two issues arise from the parties’ costs memoranda.

[9]      First,  Merisant  submits  that,  in  accordance  with  the  Court  of  Appeal’s judgment in Packing In Ltd (in liq) v Chilcott, I should take a realistic appraisal of the end result and find that Merisant was successful in its application in a meaningful and not insubstantial way.2    This success is said to be indicated by my order that Flujo pay Merisant a 40 per cent contribution to its actual costs incurred in the lead up to the scheduled substantive hearing. Accordingly, Merisant submits that I should order costs to lie where they fall.

[10]     In response, Flujo submits that it was the successful party overall, and so should be awarded usual scale costs on a 2B basis.

[11]     Second, Flujo objects to two of the steps for which Merisant seeks costs in the (discontinued) substantive proceeding.  Merisant has claimed 1.5 days of scale costs for the inspection of documents.  Flujo, however, says this is excessive given that only eight documents were discovered by it (and therefore needing to be inspected by Merisant).  It says the scale amount Merisant claims on this step would exceed the actual costs incurred, and so says Merisant should only receive 0.25 days for it.  Merisant’s counsel, however, says the actual time spent in connection with inspection of documents far exceeds the 1.5 days claimed.

[12]     Flujo  also  objects  to  Merisant’s  proposed  allocation  of two  days  for  the preparation and filing of an originating application, along with a supporting affidavit,

2      Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [6].

in relation to a subpoena.  Flujo says the granting of the subpoena was an indulgence and ought not to be taxed against it.   Merisant, however, says the subpoena application was not an indulgence and was to ensure that the employer of a key overseas witness would release that witness to attend the trial in New Zealand.

Discussion

[13]     As  noted  by  Merisant,  the  Court  of Appeal  in  Packing  In  Ltd  (in  liq) v Chilcott set out that, when determining success for the purpose of costs, the Court should take a broad and realistic appraisal of the end result:

[5]       In a case such as the present, where in broad terms each party has had  similar  success,  we  do  not  consider  it  helpful  to  focus  too closely on the question which party has failed and which has succeeded. Costs in a case such as this should rather be based on the premise that approximately equal success and failure attended the efforts of both sides. To that starting point should be added issues such as how much time was spent on each transaction or group of transactions in issue, and any other matters which can reasonably be said to bear on the Court’s ultimate discretion on the subject of costs. In the end, as in all costs matters, the Court must endeavour to do justice to both sides, bearing in mind all material features of the case.

[6]       … Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focusing on who initiated what step, and the extent to which that step succeeded or failed.

[14]     It is to be noted, however, that the Court’s observations in Packing In Ltd (in liq) v Chilcott were predicated on the basis that, in that case, it was difficult to discern a “winner” and a “loser”, and that “each party has had similar success”.  In a more recent decision, Weaver v Auckland Council, the Court of Appeal has commented on Packing In Ltd (in liq) v Chilcott, and observed that while that case is “understandable in its own context”:3

…we do not consider that Packing In is authority for the proposition that in a damages claim it should be routine for the Judge dealing with costs to be required to unpick what happened in quite the detail undertaken in that case.

[15]     Reinforcing that in the ordinary course, the “loser” pays, the Court of Appeal in  Weaver  concluded  that,  in  that  case,  the only party to  have succeeded  by a “realistic appraisal” were the appellants.4

[16]     Having considered all the material features of my 18 July judgment, I do not consider that a realistic appraisal of the end result supports Merisant’s submission that costs should lie where they fall.   I consider that a realistic appraisal of the issues involved and their determination is that Flujo was the successful party.

[17]     As is reflected in the judgment, a significant portion of counsels’ argument was directed to Merisant’s novel application to vary Flujo’s discontinuance notice. Merisant was completely unsuccessful in that application and a substantial portion of Flujo’s costs would have been directed to addressing that matter.

[18]     Flujo was also largely successful in its defence of Merisant’s application for indemnity or increased costs.  Further, Merisant only clarified its alternative position of seeking increased or indemnity costs for discrete time periods during oral submissions.

[19]     That said, a realistic appraisal of the end result does not indicate that Flujo was wholly successful in opposing Merisant’s applications.   Although Flujo successfully resisted an order of indemnity or increased costs across the entire substantive proceeding, it did not succeed in its submission that costs on a 2B basis should be awarded across the entirety of the same period.  My order of a 40 per cent contribution to Merisant’s actual costs incurred  in the lead up to the scheduled substantive hearing was not insignificant.

[20]     In all of the circumstances, I consider the appropriate course is to award scale costs to Flujo, but to reduce the award to which Flujo would otherwise be entitled. In the circumstances, I consider a reduction of 30 per cent is appropriate, to reflect the not insignificant award of indemnity costs to Merisant.

[21]     Mr Marriott has attached to his memorandum dated 1 August 2017 a table setting out costs of the applications on a 2B basis.   Counsel for Merisant have helpfully confirmed in their memorandum dated 4 August 2017 that if costs are to be awarded  to  Flujo,  the  schedule  to  Mr  Marriott’s  1 August  memorandum  is  an appropriate break down of those costs.  I accordingly award Flujo costs in respect of the application to vary the notice of discontinuance and for indemnity or increased costs in the amount set out in the schedule to Flujo’s memorandum date 1 August

2017, less 30 per cent.  Disbursements are allowed for the matters claimed in Flujo’s

1 August memorandum.5

[22]     Turing to the second issue of costs in the substantive proceeding, I do not accept Flujo’s objections to the scheduled costs for inspecting documents and the preparation of court documents to secure a subpoena.

[23]     I accept Merisant’s  counsel’s confirmation that the actual time and costs incurred in connection with the inspection of discovered documents and related steps well exceeded 1.5 days.

[24]   I also reject Flujo’s submission that the subpoena application was an “indulgence”.  While the affidavit filed in support of the application for the subpoena indicates that Mr Di Benedetto himself was willing to give evidence, by the time of the hearing, Mr Di Benedetto was employed by a company other than Merisant.   As noted in the affidavit filed in support of the subpoena application, in those circumstances,  Merisant  had  no  way  of  compelling  Mr  Di  Benedetto  to  give evidence in the forthcoming trial. Given Mr Di Benedetto was going to be a key witness for Merisant, it was entirely reasonable and appropriate for it to protect its position by seeking leave to issue a subpoena on Mr Di Benedetto in Australia. Those costs were accordingly costs reasonably incurred by Merisant in connection with Flujo’s (now discontinued) proceedings.   Further, and absent any binding commitment from Mr Di Benedetto’s current employer that Mr Di Benedetto will be

made available for any new hearing, an application for a subpoena will presumably

5      I note that the sum total listed for Flujo’s disbursements claim appears to be based on a small

arithmetical error. Flujo is entitled to the correct total of $160.

need to be re-filed, such that the costs incurred in its preparation in this proceeding are now wasted.

Result

[25]     On Merisant’s application for discontinuance and for increased or indemnity costs, Flujo is awarded costs on a 2B basis (as set out in schedule 1 to Flujo’s memorandum dated 1 August 2017), reduced by 30 percent, plus the disbursements set out in that same schedule.

[26]     On the substantive proceeding, Merisant is entitled to the scale costs and disbursements as set out in the schedule to its 4 August 2017 memorandum.

S Fitzgerald J