Flujo Holdings Pty Ltd v Merisant Company

Case

[2017] NZHC 1656

18 July 2017

No judgment structure available for this case.

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-1019 [2017] NZHC 1656

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: 12 June 2017

Counsel:

DL Marriott for plaintiff
JB Rutter for defendants

Judgment:

18 July 2017

JUDGMENT OF FITZGERALD J [Application to vary notice of discontinuance]

This judgment was delivered by me on 18 July 2017 at 4 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:          Hudson Gavin Martin, Auckland

Kensington Swan, Auckland

Flujo Holdings Pty Limited v Merisant Company [2017] NZHC 1656 [18 July 2017]

Introduction

[1]      The plaintiff (“Flujo”) commenced these proceedings against the defendants (collectively, “Merisant”) in May 2016.   In short, Flujo alleges that Merisant is engaging in misleading and deceptive conduct (in contravention of the Fair Trading Act 1986) and passing-off Flujo’s product packaging in the New Zealand market.

[2]      The substantive claims were due to be heard by me over a five-day fixture commencing on Monday, 1 May 2017.

[3]      On the Wednesday of the preceding week, i.e. 27 April 2017, Flujo’s counsel, Mr Marriott, filed an application for leave with withdraw.  It seems that there were issues between Flujo and Mr Marriott, including that he had not been paid for some time.  It later transpired that Flujo also took issue with some trial strategy.

[4]      Mr Marriott’s application for leave to withdraw was heard and determined by Wylie J on Thursday, 27 April 2017.  Wylie J granted Mr Marriott leave to withdraw. At 6:16 pm on 27 April 2017, Flujo filed a memorandum requesting that the trial be adjourned.

[5]      That application was opposed by Merisant.  Wylie J heard the adjournment application across two separate telephone conferences during the course of the day on Friday, 28 April 2017.  During one of those teleconferences, Flujo noted that if the adjournment was not granted, it would have no option but to discontinue the proceedings and commence fresh proceedings at a later date.

[6]      By minute issued at 4:29 pm on Friday, 28 April 2017, Wylie J dismissed Flujo’s application to adjourn.  At 4:52 pm, Flujo filed a notice of discontinuance of the proceedings.

[7]      Merisant   has   now   filed   an   application   to   vary   Flujo’s   notice   of discontinuance.  In short, Merisant says the discontinuance is an abuse of process. Rather  than  seek  an  order  pursuant  to  r 15.22  setting  aside  the  notice  of discontinuance, Merisant seeks an order that the notice of discontinuance be varied so as to prohibit Flujo from commencing fresh proceedings against Merisant arising

out the same or substantially the same facts as those giving rise to these proceedings. Merisant also seeks indemnity costs, or in the alternative, increased costs, in respect of the discontinued proceedings.

[8]      It appears that an application to vary a notice of discontinuance, rather than to set it aside, is novel and has not previously been considered by the New Zealand courts.

Factual background

[9]      The factual background can be briefly summarised.

[10]     In the period 2008 to 2009, Flujo developed an artificial sweetener based on a natural Stevia-based product.  Flujo sells this product under the brand “Natvia”.  It has been sold by the major New Zealand supermarket chains since July 2010.

[11]     Merisant has also developed and sells artificial sweeteners, principally under the brand “Equal”.  It also sells a Stevia-based sweetener under the brand “Naturals”. Flujo alleges that Merisant has successively repackaged and rebranded its Naturals product range no less than five times, and that each iteration has become closer in concept, appearance and design to that of Flujo’s Natvia product.  Matters came to a head in January 2016 when Merisant launched a further iteration of its Naturals product. This led to Flujo commencing these proceedings.

[12]     Flujo initially sought an interim injunction restraining Merisant from using the new packaging, pending resolution of the dispute.  That application was heard by Courtney J on 21 July 2016.  By judgment dated 2 August 2016, Courtney J declined to grant the injunction.1   In terms of the passing-off cause of action (and by reference to the elements of the cause of action as summarised by the House of Lords in Reckitt & Coleman Products Ltd v Borden Inc2), Courtney J concluded that there was a serious question to be tried that the Natvia product’s packaging was sufficiently distinctive so as to found a claim for goodwill in it.   However, she noted that the

evidence before her did not satisfy her that there was a serious question to be tried

1      Flujo Holdings Pty Ltd v Merisant Company [2016] NZHC 1779.

2      Reckitt & Colman Products Ltd v Borden Inc [1990] 1 WLR 491 (HL) at 499.

that the Naturals packaging had or was likely to lead to confusion.   Courtney J

concluded:3

It is possible that at trial there will be stronger evidence to show actual or probable confusion. But the evidence before me is insufficient to show a serious issue for trial.

[13]     Courtney J then went on to examine the balance of convenience.  She noted that if she had to determine that aspect of the application, she would have found the balance  of  convenience  favoured  granting  an  injunction.    In  this  context,  she observed that the proceeding might justify an application for a priority fixture.

[14]     Flujo subsequently sought but was declined a priority fixture.  In the event, and as noted, a five-day trial was due to commence before me on 1 May 2017.

[15]     It seems there were a number of timetable breaches by Flujo during the course of the proceedings. These ultimately led to Merisant seeking “unless orders” in February 2017.  Toogood J declined to grant unless orders, but in a minute dated

22 February 2017, observed that:

…the Court would not take a kindly view of any future non-compliance with the orders which were to be made today.

[16]     I have already summarised in the introductory section above the key steps which led to the proceedings being discontinued.  In addition:

(a)      In a minute dated 27 April 2017, Wylie J noted that Flujo’s failure to pay Mr Marriott over some period of time was “a serious breach of contract of retainer”.

(b)      In Flujo’s memorandum dated 27 April seeking an adjournment of the

trial, Flujo stated:

The withdrawal of the solicitor and counsel is no way related to the plaintiff’s preparedness for trial or a willingness to proceed, but solely in relation to the arrangement regarding fees.  The plaintiff would in fact have been ready for trial if not the issue over fees.

(c)      In  a  minute  dated  28 April  2017  declining  the  application  for  an adjournment,  Wylie  J  noted  that  the  “current  situation  has  arisen purely  because  of  [Flujo’s]  intransigence.”    Wylie J  observed  that there had been no attempt to pay Mr Marriott’s fees in part or pay the invoiced  amounts  to  a  third  party  stakeholder.    He  described  the overall situation as follows:

The  plaintiff’s  current  dilemma  is  entirely  of  its  own making.  It has not paid its counsel.  It has not put in place any alternative arrangements for representation.   It has not paid the hearing fees.

(d)In the same minute, Wylie J noted that Merisant was ready to proceed to trial, and while any prejudice from the discontinuance could be addressed by an award of costs, Merisant was exposed to a claim for damages which needed to be resolved promptly.  He noted:

If the proceeding is adjourned their potential exposure will increase.   Any new hearing date will not be until March

2018.   There has been no offer by the plaintiff to cap its

damages claim.

(e)       Finally, in one of the telephone conferences held on Friday 28 April

2017, Mr Franklin, an Australian solicitor granted leave to appear for Flujo, indicated that if the adjournment was not granted, Flujo would be left with no option but to file a notice of discontinuance.  Wylie J recorded the following in his minute of later that day:

Mr Franklin did say that if the adjournment is not granted, his client may discontinue the proceeding and file afresh. That course would likely have costs consequences but it is a matter for the plaintiff.

[17]     As noted, the application to adjourn was declined and Flujo filed its notice of discontinuance shortly thereafter.

[18]     At the hearing of Merisant’s present application, I was informed that Flujo has indeed filed fresh proceedings.   I do not have further information about those proceedings at this time, nor do I need that information for the purposes of determining Merisant’s application.

The application

[19]     Merisant seeks the following orders:

1.1The notice of discontinuance filed by Mr Franklin on behalf of the plaintiff dated 28 April 2017 be varied to provide that the plaintiff’s claim is discontinued with prejudice, and neither the plaintiff (nor any of its related entities) shall be entitled to commence another proceeding against one or more of the defendants if that further proceeding arises out of facts that are the same as or substantially the same as those relating to this proceeding.

1.2The plaintiff shall pay to the defendants indemnity costs, or failing that increased costs, up to and including this application.

[20]     Merisant does not base its application for the first order on r 15.22.  It rightly recognises that r 15.22 is limited to setting aside a notice of discontinuance for abuse of process, rather than varying a notice of discontinuance.  Rather, Merisant relies on the Court’s inherent jurisdiction to control its own process.

Parties’ submissions on application to vary notice of discontinuance

[21]     Ms Rutter, counsel for Merisant, makes the following points in support of

Merisant’s application to vary the notice of discontinuance as an abuse of process.

[22] First, she says that Flujo’s discontinuance needs to be considered against the broader history of Flujo’s failures and delays over the course of these proceedings. Ms Rutter submits that Flujo has been responsible for repeated failures to meet court-ordered dates and dates agreed between the parties, particularly in relation to discovery. As noted, some of these issues ultimately led to the application for unless orders discussed at [15] above.

[23]     Second, and relying on the House of Lords’ decision in Castanho v Brown

& Root (UK) Ltd, Ms Rutter submits that, in addition to its jurisdiction to set aside a notice of discontinuance pursuant to r 15.22, the Court has inherent jurisdiction to vary a notice of discontinuance in the manner sought in this case.4     Ms Rutter

submits  this  is  also  consistent  with  observations  of  Wylie J’s  in  Telstra  v

Commissioner of Inland Revenue.5

[24]     Third, and based on Wylie J’s decision in Telstra v Commissioner of Inland Revenue, Ms Rutter submits the following factors, collectively or individually, can contribute to a finding of an abuse of process:

(a)       When the legal process is used to exert pressure to effect an object not within the scope of the process.

(b)Where the legal process is used for a purpose other than that for which the proceedings are properly designed and exist.

(c)       Where  the  plaintiff  in  the  proceedings  is  seeking  some  collateral advantage beyond what the law offers.

(d)Where  the  litigation  was  not  justly,  speedily,  and  economically conducted.

(e)       Commencing a litigation that a party has no intention of bringing to a conclusion.

[25]     Fourth, Ms Rutter submits that the discontinuance in the present case was designed to avoid an imminent trial, in circumstances where Flujo was without representation due to its own intransigence, was attempting to leverage a last minute settlement which went well beyond what it was legally entitled to and had stated its intention to strategically discontinue and reissue the same claim if the last minute adjournment was not granted.

[26]     Ms Rutter accordingly submits that a number of those factors set out at [24]

above are present in this case.  In particular, given Flujo’s delays and failures over

the course of the proceedings, she says the litigation was not justly, speedily and

5      Telstra New Zealand Holdings Ltd v Commissioner of Inland Revenue (2010) 21 PRNZ 1 (HC).

I discuss both Castanho v Brown & Root (UK) Ltd and Telstra New Zealand Holdings Ltd v
Commissioner of Inland Revenue at [35]-[54] below.

economically conducted.  She further submits that the proceedings were brought for an ulterior purpose, namely not genuinely to bring this matter to a hearing, but to reach a commercial settlement using the litigation to pressurise (and “indeed hound”) Merisant.   Ms Rutter further submits that there is real prejudice to Merisant from Flujo’s  actions,  in  that  it  is  by  no  means  clear  that  in  relation  to  any  fresh proceedings filed, it will continue to have access to the witnesses it proposed to call in the present case (a number of who are based overseas).

[27]     Mr Marriott for Flujo makes the following points.6

[28]     First,  Mr Marriott  submits  that  the  application  to  vary  the  notice  of discontinuance is “utterly misconceived”.  He submits that the Court does not have inherent jurisdiction to make an order barring Flujo from filing fresh proceedings, which would amount to a de facto setting aside of the notice of discontinuance, coupled with an immediate defendant’s summary judgment upon or strike out of Flujo’s claims.

[29]     Second, Mr Marriott submits that the only power the Court has to restrict fresh  proceedings  arises  under  r 15.24.    This  provides  that  if  proceedings  are discontinued and fresh proceedings are subsequently re-filed arising out of the same or substantially the same facts, those fresh proceedings may not be commenced until the plaintiff has paid any costs ordered to be paid in respect of the original proceedings.

[30]     Third, to the extent the Court has inherent jurisdiction to vary a notice of discontinuance, the scope of that jurisdiction can be no broader than that contained in r 15.22.   Mr Marriott submits that any such jurisdiction would give rise to a breach of natural justice in any event.

[31]     Fourth, Mr Marriott says Flujo was a willing plaintiff that was intending to go to trial, but given the issues that had arisen with counsel, it “had no option but to

6      At the hearing before me, Ms Rutter likened Mr Marriott’s appearance for Flujo to a “phoenix rising from the ashes”.  I can only surmise that the issues between Flujo and Mr Marriott have now been resolved.

discontinue in order to preserve its ability to re-file and fight is case fairly and with

the assistance of an experienced legal representative”.

[32]     Finally, Mr Marriott submits that any inconvenience or prejudice occasioned to Merisant as a result of the discontinuance is already reflected in the fact that a discontinuing  plaintiff  must  ordinarily  pay  the  defendant’s  costs.    Mr Marriott submits  that  what  has  occurred  in  this  case  is  squarely  anticipated  by  the combination of rr 15.22 (which gives a plaintiff the right to discontinue); 15.23 (which protects the defendant in such circumstances by way of costs awards); and

15.24 (which requires a discontinuing plaintiff to have paid any costs ordered before being permitted to commence fresh proceedings arising out of the same or similar facts).

Legal principles – notice of discontinuance as an abuse of process

[33]     As noted, the precise order sought in this case appears novel.  Neither party referred me to any New Zealand (or other) authorities directly on point.

[34]     Nevertheless,  Ms  Rutter  submits  that  both  Castanho  v  Brown  &  Root (UK) Ltd and Telstra v Commissioner of Inland Revenue provide support for the proposition that the Court has inherent jurisdiction to grant the order sought in this case.  Given the novel issue to which this aspect of Merisant’s application gives rise, I consider each of these authorities in some detail.

Castanho v Brown & Root (UK) Ltd

[35]   In Castanho v Brown & Root (UK) Ltd, the plaintiff had commenced proceedings in England.  However, when he realised he could obtain more by way of damages in America, he filed a notice of discontinuance in England and commenced fresh proceedings in America.   Prior to the discontinuance, the defendants to the English proceedings had made two interim payments to the plaintiff and had also filed an admission of liability.

[36]     The trial Judge set aside the notice of discontinuance as an abuse of process, and granted an injunction restraining the plaintiff from prosecuting or continuing his

proceedings in America.  It appears that it had been conceded that if the Judge made an order setting aside the notice of discontinuance, he also had jurisdiction to make an order restraining the plaintiff from pursuing his claim in America.

[37]     On appeal, the Court of Appeal (Lord Denning dissenting) reversed the trial

Judge’s rulings, restored the notice of discontinuance, and discharged the injunction.7

[38]     The respondents appealed to the House of Lords.  Lord Scarman, delivering the leading speech, first addressed the issue of whether a notice of discontinuance could be set aside for abuse of process, and if so, whether the notice in that case should be.  He observed that, pursuant to the Rules of the Supreme Court as they stood at the time of discontinuance, the plaintiff had been entitled to discontinue without leave.   This was despite the fact that interim payments already had been

made to the plaintiff.  In the Court of Appeal, Lord Denning had observed that:8

I fear that the draftsmen of interim payments forgot all about notices of discontinuance.    Interim payments  are  quite  inconsistent  with  a right to discontinue without leave.

[39]     Lord Scarman agreed:9

Like Lord Denning MR, I have no doubt that the failure to amend the rule relating to notice of discontinuance was a casus omissus. But I do not agree that it is an omission which the courts can make good by reading into the rule a provision that leave is needed when the rule expressly said it was not. Unless, therefore, it is possible to treat a notice of discontinuance without leave which complies with the Rules of the Supreme Court as an abuse of process (which is what Parker J did), the notice cannot be struck out.

The court has inherent power to prevent a party from obtaining by the use of its process a collateral advantage which it would be unjust for him to retain; and termination of process can, like any other step in the process, be so used. I agree, therefore, with Parker J and Lord Denning MR that service of a notice of discontinuance without leave, though it complies with the rules, can be an abuse of the process of the court.

[Emphasis added]

7      Castanho v Brown & Root (UK) Ltd [1980] 1 WLR 833 (CA).

8      At 854.

9      Castanho v Brown & Root (UK) Ltd [1981] AC 557 (HL) at 571.

[40]     Merisant  relies  on  this  extract  from  Lord  Scarman’s  speech  for  the proposition that the Court has inherent jurisdiction to make an order varying the notice of discontinuance to prevent Flujo from commencing fresh proceedings. However, Lord Scarman’s conclusion as to the Court’s inherent jurisdiction was against the backdrop of there being no specific rule of court requiring leave to

discontinue  when  interim  payments  had  been  made.10    Further,  the  inherent

jurisdiction was limited in that case to setting aside the notice of discontinuance as an  abuse  of  process,  i.e.  requiring  the  plaintiff  to  continue  his  proceedings  in England. The power did not extent to preventing him from pursuing his claim at all.

[41]     Turning to the second issue of whether the notice of discontinuance in that case  was  an  abuse  of  process,  Lord  Scarman  held  that  it  was.    He  said  the following:11

A sensible test is that which both the judge and Lord Denning MR applied. Suppose leave had been required (as it would have been, if the notice had been served 24 hours later), would the court have granted unconditional leave? It is inconceivable that the court would have allowed a plaintiff, who had secured interim payments and an admission of liability by proceeding in the English court, to discontinue his action in order to improve his chances in a foreign suit without being put upon terms, which could well include not only repayment of the moneys received but an undertaking not to issue a second writ in England.

[Emphasis added]

[42]     Again, the terms upon which leave to discontinue might have been granted, would not have prevented the plaintiff from bringing proceedings at all; rather, had a notice of discontinuance been permitted on the terms identified above, the plaintiff could still have pursued his proceedings in America.

[43]     Lord  Scarman  then  turned  to  whether  the  plaintiff  ought  to  have  been restrained from continuing his American action.  Two principles were drawn from earlier authorities on injunctions to restrain a litigant from pursuing foreign proceedings (now known as “anti-suit injunctions”).  Those were first, whether there was another forum in which justice could be done between the parties; and second,

an injunction must not deprive the plaintiff of a legitimate personal or juridical

10     It appears that, by the time the matter came before their Lordships, the Rules of the Supreme

Court had been amended to require leave to discontinue in such circumstances: at 577.

advantage which would be available in the foreign jurisdiction.   Applying those principles,  Lord  Scarman  concluded  that  an  injunction  ought  not  to  have  been granted.

[44]     Having found that the Court of Appeal was right to have discharged the injunction,  but  the  trial  Judge  was  right  to  have  struck  out  the  notice  of discontinuance as an abuse of process, Lord Scarman then returned to what was to be done with the English action.  He concluded as follows:12

Had the plaintiff sought leave to discontinue, as he should have done and now, under the amended rules of court, would have to do, the logical course for the court would have been to give leave to discontinue on such terms as to  costs,  repayment  of  interim  payments,  and  future  proceedings  in England as the defendants might seek and the court think just.

[Emphasis added]

[45]     Accordingly,  while  the  above  extract  from  Lord  Scarman’s  judgment indicates that the plaintiff’s earlier right to discontinue might nevertheless have been subject to court-ordered terms (including restraint on the bringing of future proceedings before the English courts), this was again in the context of the plaintiff being able to pursue his claim elsewhere (it being accepted that both the English and American courts had jurisdiction to determine the underlying claim).

Telstra New Zealand Holdings Ltd v Commissioner of Inland Revenue

[46]     In Telstra v Commissioner of Inland Revenue, Telstra had commenced tax challenge proceedings in respect of income tax assessments issued for the 2003 to

2005 years.  Those proceedings had been designated by the Commissioner as a test case.   Telstra subsequently conducted an internal review of the value to it of the disputed  tax  deductions  for  the  2003  to  2005  income  tax  years.    That  review suggested that the tax losses generated by the disputed deductions would not begin to be utilised against net taxable income until sometime between the 2017 and 2019 income years.   Because of that, Telstra reassessed the commercial benefit of continuing with the 2003 to 2005 proceedings.

[47]     The proceedings had a three-week fixture due to commence on 26 October

2010.    Evidence  had  been  exchanged  and  Telstra’s  reply  briefs  were  due  by

2 September 2010.  On 3 September 2010, it filed a notice of discontinuance.  A few weeks later, Telstra commenced proceedings challenging the assessments for each of the 2006 to 2008 income tax years.

[48]     The Commissioner sought an order pursuant to r 15.22 that Telstra’s notice of discontinuance be set aside as an abuse of process.  This was said to be on the basis that first, the discontinued proceedings had, to Telstra’s knowledge, been designated a test case by the Commissioner; and second, that substantially the same points had been raised by Telstra in the fresh proceedings for the 2006 to 2008 income tax years.  The Commissioner also sought costs on an indemnity basis, in the event the discontinuance was not set aside.

[49]     Discussing the principles applicable to discontinuance, Wylie J stated:13

Inherent in r 15.19 is the principle that a plaintiff cannot be compelled against his will to proceed to a trial or to a judgment. If a plaintiff finds it unnecessary, or is unwilling to put his allegations in a statement of claim to proof, then the defendants' remedy will generally be to apply for costs.

[50]     In respect of the power under r 15.22 to set aside a notice of discontinuance as an abuse of process, Wylie J referred to the commentary in McGechan on Procedure, which noted that situations where discontinuing a proceeding constitutes an abuse of the court’s process will “surely be rare”.   Wylie J observed that the jurisdiction to set aside a discontinuance “is likely to be used sparingly and only where it is plainly justified”.

[51] Wylie J surveyed the available authorities on when a notice of discontinuance will amount to an abuse of process, and distilled those key principles relied on by Merisant in this case and as set out at [24] above. He then concluded:14

As can be seen from these examples, misconduct must be plain and obvious before a Court will find that its processes have been abused.

13     Telstra New Zealand Holdings Ltd v Commissioner of Inland Revenue (2010) 21 PRNZ 1, at

[30].

14 At [42].

[52]     Applying the principles to the case before him, Wylie J did not consider that

Telstra’s notice of discontinuance was an abuse:

(a)      There   was   nothing   in   the   evidence   to   suggest   that   Telstra’s discontinuance was a strategic decision on its part to gain a litigation advantage.

(b)There  was  nothing  to  suggest  that  it  was  seeking  to  procure  a collateral advantage.

(c)      Rather, the decision to discontinue reflected Telstra’s conclusion that the costs of proceeding to trial were disproportionate to the economic value of the tax losses at issue.

(d)While the discontinuance had “seriously inconvenienced” the Commissioner, that in itself did not “inappropriately prejudice” the Commissioner and his expert witnesses (in terms of cost and delay).

[53]     Of some relevance to Wylie J’s decision was his conclusion  that “there can be no new proceedings in relation to the 2003 and 2005 income tax years” given they were by then time-barred.   Counsel for the Commissioner noted, however, that if Telstra was successful in its 2006–2008 income tax year proceedings, the Commissioner might consider he would be obliged to re-open the 2003–2005 assessments, a course open to the Commissioner under s 113 of the Tax Administration Act 1994 (“Act”).  That would then “re-set” the limitation period in relation to those years.  In response, Telstra provided an undertaking not to seek a re- opening of the 2003–2005 assessments under s 113 of the Act, nor to commence judicial review proceedings of any related decisions taken by the Commissioner.  In this context, and in an extract from the judgment upon which Merisant places some reliance, Wylie J observed:

Had leave to discontinue been required, I would have imposed a condition to this effect on Telstra.

[54]     This does appear to support Merisant’s argument in this case, namely that the Court can, in appropriate circumstances, make an order preventing the filing of future proceedings.

Other authorities

[55]     Two further authorities are useful to note.   In Fakih Brothers v AP Moller (Copenhagen) Ltd, the English High Court set aside a notice of discontinuance in circumstances where the plaintiffs were attempting, by the discontinuance, to avoid the  imposition  of  conditions  which  had  earlier  been  ordered  by  the  Court.15

Similarly, in Gilham v Browning, the defendant sought leave to file late evidence on its counterclaim.   The Court declined to grant leave.   The defendant then filed a notice of discontinuance with the intention of issuing fresh proceedings in respect of the counterclaim.16  The English Court of Appeal noted that the existence of an abuse of process is a question of fact and degree.   In that case, the Court held that the discontinuance was an abuse of process, in that the defendant was seeking to escape

“by  a  side  door”  the  first  action,  in  which  the  counterclaim  was  evidentially

hopeless.

[56]     Merisant says a similar situation exists here; namely, the discontinuance was simply a “device” to get around its earlier adjournment application having been declined.   However, in both Fakih Brothers v AP Moller (Copenhagen) Ltd and Gilham v Browning (and similar cases), the result of the courts’ finding of abuse of process was to set aside the notice of discontinuance, so that the plaintiff (or counterclaim defendant) must proceed with its claim.  That is obviously a different outcome to that sought by Merisant in this case.

[57]     Finally, in considering whether the Court has inherent jurisdiction to make the order sought in this case, namely I am mindful of a line of authorities which appear to suggest that either no such inherent jurisdiction exists, or if it does, it is to

be exercised in only the most exceptional of circumstances.

15     Fakih Brothers v AP Moller (Copenhagen) Ltd [1994] 1 Lloyd’s Rep 103 (QB).

16     Gilham v Browning [1998] 1 WLR 682 (CA).

[58]     The first of these authorities is Stewart v Auckland Transport Board.17   In that case, the plaintiff had issued successive proceedings against the Board, which had been dismissed by various courts.   In the context of an application to dismiss the latest of the plaintiff ’s actions, the Board sought an additional order that the plaintiff be prohibited from commencing any further action against the Board without the prior leave of the Court.  Fell J held that the Court had no inherent power to order that a plaintiff may not commence proceedings against the defendant without leave of the Court (even if those proceedings might be vexatious).

[59]     It appears that s 88A18 was inserted into the Judicature Act 1908 to overcome Fell J’s decision in Stewart v Auckland Board.19   Section 88A (now replaced by s 166 of the Senior Courts Act 2016) placed restrictions on the institution of what have commonly been referred to as “vexatious” actions.  In D v H, Robertson J heard an

appeal against orders made in the Family Court, which had included an order that the defendant was not permitted to bring any further proceedings for a period of two years.20    Having referred to s 88A of the Judicature Act (and concluding that it did not apply to the facts before the Court), Robertson J observed that any jurisdiction in the Family Court to make such an order “must come from the inherent power of any court to control its own processes and to safeguard them from abuse”.  Robertson J referred to observations of the House of Lords in Raymond v Honey21 and Attorney-

General v Times Newspapers Ltd,22  to the effect that every citizen has the right of

unimpeded access to a court unless that right is abrogated by statute.  The Judge also referred to Attorney-General v Jones, where Staughton LJ had concluded:23

The power to restrain someone from commencing or continuing legal proceedings is no doubt a drastic restriction of his civil rights, and is still a restriction if it is subject to the grant of leave by a High Court Judge.

[60]     A  similar   approach   has   been   taken   by   the  Australian   courts.      In

Commonwealth Trading Bank v Inglis, the High Court of Australia considered an

application for an order “pursuant to the inherent jurisdiction” of the Court that no

17     Stewart v Auckland Transport Board [1951] NZLR 576 (SC).

18     Re-numbered s 88B as of December 2005.

19     See the observations of Robertson J in D v H [2000] 2 NZLR 242 (HC) at [20].

20     D v H [2000] 2 NZLR 242 (HC).

21     Raymond v Honey [1983] 1 AC 1 (HL).

22     A-G v Times Newspapers Ltd [1974] AC 273 (HL).

23     A-G v Jones [1990] 1 WLR 859 (CA) at 865.

legal proceedings should be instituted or applications in existing proceedings made or appeals lodged by the plaintiffs without leave of the Court.24   This was also a case of  an  alleged  vexatious  litigant.    The  High  Court  held  that  cases  dealing  with inherent  jurisdiction  to  control  the  courts’ own  processes  and  prevent  abuse  of process were in the context of proceedings already pending in the court itself.  The High  Court  observed  that  it  was  not  surprising  that  the  courts  have  limited

themselves to exercising their powers in relation to proceedings which have already been taken in a court and thus placed under their control.  In this way, the High Court distinguished between utilising inherent jurisdiction to control abuse of process in the context of proceedings already underway, and making orders in respect of (prospective) proceedings yet to be commenced.

[61]     Having surveyed these and other authorities, Robertson J concluded:25

If there is a power for a Family Court to make such orders under the Guardianship Act 1968 in the Court's inherent power to control its own processes, I think it would be very odd if the power permitted the Court to do what it is not permitted to do under the statutory provisions (even if the statutory provisions do relate to other Acts). There can be no doubt that preventing or inhibiting access to the Court must always be treated as an unusual step, justifiable only in extraordinary circumstances and permissible only where there is a properly established evidential basis for doing so after a fair and open hearing on the point.

[Emphasis added]

[62]     More recently, in KM v TL, Brown J referred to both Stewart v Auckland Transport Board and Commonwealth Trading Bank v Inglis as confirming that the courts’ inherent power to deal with abuse of process is confined to proceedings already pending in the court.26     I also observe Ellis J’s observations in Belyaev v Tenancy Tribunal to the effect that if the court retains an inherent jurisdiction to set aside a discontinuance “it is most unlikely that such jurisdiction has any ambit that is any broader than r 15.22”.27

[63]     For  completeness,  I  note  that  more  recent  English  decisions  have  not followed the Stewart v Auckland Transport Board and Commonwealth Trading Bank

24     Commonwealth Trading Bank v Inglis (1974) 131 CLR 311.

25     D v H [2000] 2 NZLR 242 (HC) at [33].

26     KM v TL [2016] NZHC 1327.

27     Belyaev v Tenancy Tribunal HC Auckland CIV-2003-404-7322, 6 December 2010 at [5].

v Inglis line of cases.  In Ebert v Venvil, the English Court of Appeal departed from these decisions to hold that the court can, under its inherent jurisdiction, issue an injunction to prevent a vexatious party from bringing future proceedings.28   Cooper J noted this decision in Hirstich v Family Court at Manukau, while also recording that it has been the subject of some academic criticism.29   But irrespective of whether the broader English approach might be accepted in New Zealand, to the extent that there is a residual inherent jurisdiction to prohibit a party from commencing fresh proceedings, it is clear that it would only be exercised in exceptional circumstances.

Analysis

[64]     It is by no means clear that the Court has the inherent jurisdiction to make the order sought by Merisant.   The order seeks to bar Flujo from ever bringing proceedings in this jurisdiction arising out of the facts and circumstances giving rise to these (now discontinued) proceedings.   Bringing such proceedings is, however, squarely anticipated and permitted by r 15.24.  I also am mindful of the extremely limited circumstances in which a court can prevent a party from having access to the courts.

[65]     I accept that in Castanho v Brown & Root (UK) Ltd, Lord Scarman did speak of inherent jurisdiction being deployed to prevent an abuse of process.  However, as noted, those comments were in the context of considering whether a notice of discontinuance should be set aside, the effect of which would be to require the plaintiff to continue with its claim, rather than shutting the plaintiff from the court’s door altogether.  Similarly, I accept that Wylie J appeared to consider that, if leave to discontinue had been required in the case before him, he may have imposed a term to the effect that Telstra could not take steps to challenge the Commissioner’s future decision-making in respect of the 2003–2005 income tax years.   However, those observations were against the backdrop of Telstra already having undertaken not to

take any such steps, such that Wylie J’s comments were obiter only.  They were also

28     Ebert v Venvil [2000] Ch 484 (CA).

29     Hirstich v Family Court at Manukau [2013] NZHC 963, [2013] NZFLR 611 at [20]. For academic criticism see Michael Taggart “Alexander Chaffers and the Genesis of the Vexatious Actions Act 1896” (2004) 63 CLJ 656 at 681.

made in the context of a hypothetical example of what would have occurred had leave to discontinue been required.  Leave is obviously not required in this case.

[66]     Further, even if the Court had inherent jurisdiction to make an order of the type sought by Merisant, I would not have granted such an order in any event.  As can be seen from the authorities discussed above discussion, any such orders would be reserved for the most exceptional of circumstances.

[67]     In this case, Flujo says that, other than the issues which had arisen through its dispute with counsel, it was ready and willing to go to trial.  I am not satisfied on the evidence before me that that was not the case.   Moreover, discontinuance close to trial as a result of issues with counsel (often concerning payment) is not unprecedented.   Those  facts  in  and  of themselves  cannot,  in  my view,  mean  a consequent notice of discontinuance is an abuse of process.

[68]     On Merisant’s case, Flujo was not ready for trial.  Again, however, that is not an uncommon basis for an application for adjournment shortly before trial, and which can sometimes lead to proceedings being discontinued when the application is not granted.  Indeed, the High Court Rules expressly preserve a plaintiff ’s right not to be forced on to trial, and preserve its right (subject to the payment of costs) to commence and pursue fresh proceedings arising out of the same facts.

[69]     A late discontinuance, and the prospect of fresh proceedings arising out of the same facts, obviously causes great inconvenience to a defendant.  However, as Wylie J observed in Telstra v Commissioner of Inland Revenue, that in and of itself also does not give rise to an abuse of process.  Like in Telstra v Commissioner of Inland Revenue, there will undoubtedly be wasted costs.  However, I consider it reasonable to assume that the evidence in these proceedings will largely be able to be used in any fresh  proceedings.    I accept  that  there  will  be inconvenience  and  potential prejudice in respect of Merisant’s witnesses.   But again, such issues are, without more, inherent in fresh proceedings being permitted under r 15.24 (so long as any costs awards have been satisfied).   And on this issue, no particular evidence was

advanced by Merisant at the hearing, rather than a general concern that there may be issues in due course.30

[70]     There is also no doubt that Merisant would have been working extremely hard in the immediate lead-up to the trial, and incurred significant costs as a result. As discussed below in relation to Merisant’s costs application, I am of the view that costs incurred in the immediate lead up to the trial itself are likely to be largely, if not wholly, wasted.   Again, however, wasted costs associated with such activities are inherent in any late discontinuance.  The appropriate remedy in such circumstances is an award of costs, not an order barring Flujo from having access to this Court.

[71]     Nor am I satisfied that the other factors relied on by Merisant (summarised at

[24] above), either individually or cumulatively, give rise to an abuse of process:

(a)      I do  not  see  Flujo’s  failings  and  delays  during  the  course  of  the proceedings as adding materially to the analysis.   What must be considered is whether the discontinuance itself amounts to an abuse of process.  In this case, the earlier delays have already been considered and dealt with by the Court. And, unfortunately, such delays and non- compliance with Court timetabling orders are not uncommon.  That in no way sanctions such conduct.  Court timetable orders are orders of the Court, not “guidelines”.   Nevertheless, a failure to comply with timetabling orders would not, without more, elevate a later notice of discontinuance into an abuse of process.

(b)I am also not satisfied that the evidence demonstrates that these proceedings had been commenced and were being pursued for an ulterior purpose, in the sense discussed in the authorities.  It is quite true that there have been ongoing settlement discussions.   It is also evident that those settlement discussions intensified immediately prior to  the  proceedings  being  discontinued.    It  is  not  surprising  that

settlement  discussions  intensify  immediately  before  trial.     Many

30     The key witnesses reside in Australia.  A New Zealand subpoena can, with leave, be served in

Australia.  See, s 153 of the Evidence Act 2006.  Leave was granted in this case (by Lang J on
31 March 2017).

commercial proceedings settle “on the court steps”.  Flujo may well have hoped that the proceedings would settle, and was trying to bring about that result.  Again, that would not be unusual.  But the evidence does not satisfy me that Flujo never intended to proceed to trial at all.

[72]     Accordingly, I do not consider Flujo’s notice of discontinuance to be an abuse of process.  While Flujo’s conduct over the course of the proceedings, including in the lead up to and the discontinuance itself, is not to be condoned, it short of being an abuse which might justify an order prohibiting it from bringing fresh proceedings.

[73]     This aspect of Merisant’s application is accordingly declined.

Costs

Introduction

[74]     There is no dispute that Flujo must pay Merisant’s costs up to the point of discontinuance.  The question is, what costs?  Should those costs be assessed on the basis of scale, or is there a proper and principled basis to make an order of indemnity or increased  costs,  either  across  the  whole of  the proceedings  or in  relation  to particular stages only?

Indemnity costs sought

[75]     As its primary position Merisant seeks an order that Flujo pay Merisant’s costs of these proceedings on an indemnity basis, for the entirety of the proceedings or at least in respect of certain stages.  In summary, Merisant seeks the following:

(a)       Indemnity  costs  for  the  period  between  2 September  2016  and

28 April 2017, being that duration of the proceedings (though excluding costs already assessed and paid in relation to the unless orders, referred to at [15] above). Affidavit evidence has been filed demonstrating that the total costs sought on an indemnity basis are

$514,460.13.

(b)Alternatively, indemnity costs for the period between 19 March 2017 and 28 April 2017, being the period from Merisant’s without prejudice save as to costs settlement offer until discontinuance.   Affidavit evidence   has   been   filed   demonstrating   that   these   costs   total

$203,841.27.

(c)      Finally, and also in the alternative, indemnity costs for the period between  10 April  2017  and  28 April  2017,  being  the  time  period during  which  Merisant  submits  that  Mr Marriott  was  aware  of circumstances which put the trial in jeopardy, but did not notify the Court or Merisant.  Affidavit evidence has been filed demonstrating that  the  actual  costs  incurred  by  Merisant  during  this  period  are

$145,086.77.

Parties’ submissions in respect of indemnity costs

[76]     Merisant advances its claim for indemnity costs on a number of different bases:

(a)      First, Flujo’s claim is entirely lacking in merit.  Merisant submits that Courtney J’s observations in her judgment on the interim injunction application are a strong indication that Flujo’s  claim is weak and lacking in substantive merit.   Quite properly, however, Merisant accepts that the Court cannot substantively consider the merits of the case at this point.   Nevertheless, Merisant submits that when considering costs, “the Court can and should take into account its prima facie view as to the basis of the claim”.

(b)Second, Flujo’s history of intransigence and mismanagement of the case.  Merisant submits that Flujo has engaged “delay tactics” and has had an “aggressive but cavalier attitude to these proceedings”.

(c)       Third,  Flujo’s  rejection  of  a  reasonable  settlement  offer  (dated

17 March 2017).  Merisant acknowledges that it does not yet have a judgment on the claim that can be used by the Court to assess whether

Merisant achieved better than the settlement offer.   Nevertheless, Merisant invites the Court to review that offer and its reasonableness, and grant indemnity costs.

(d)Finally,  Flujo’s  discontinuance  of  the  proceedings  at  the  eleventh hour, effectively circumventing the adjournment it had just been denied.  Merisant points to the fact that, despite it being apparent that the issues between Flujo and its counsel had existed for some weeks, neither Flujo nor its counsel informed the Court or Merisant that there were issues which might put the trial in jeopardy.

[77]     Merisant  submits  that  the  cumulative  effect  of  these  factors  more  than justifies an award of indemnity costs.

[78]     Not surprisingly, Flujo opposes an award of indemnity costs, both across the whole of the proceedings and in respect of certain stages only.  Mr Marriott submits the following:

(a)      First, Flujo’s claim was not weak and there has been no application to strike it out or obtain summary judgment on it.  Mr Marriott submits that Merisant’s assessment of Courtney J’s observations on the interim injunction application misconstrues her Honour’s comments, which are not to be taken as a direct assessment of the underlying merits of the claim.

(b)Second, while there have been delays in compliance with timetable orders, any such delays have already been raised with and dealt by the Court (namely through Toogood J’s minute dated 22 February 2017 and costs judgment dated 28 April 2017).

(c)      Third, rejection of a settlement offer itself cannot justify indemnity costs.   In  the absence of a final determination  on the substantive issues, no proper assessment can be made as to whether or not that rejection was unreasonable in all of the circumstances.

(d)Finally, discontinuing the proceeding at a late stage cannot itself give rise to indemnity costs, given it is expressly permitted pursuant to r 15.19.     Rather,  upon  such  a  discontinuance,  the  discontinuing plaintiff must ordinarily pay the defendant’s costs, the default position being that those costs are based on scale.

Approach to indemnity costs

[79]     The presumption within r 15.23 that a discontinuing plaintiff will pay the defendant’s  costs  does  not  itself  lead  to  increased  or  indemnity  costs  being awarded.31   Accordingly, upon discontinuance, the normal costs rules and principles will apply.

[80]     Indemnity costs are available in those circumstances prescribed by 14.6(4). Rule 14.6(4) provides as follows:

14.6     Increased costs and indemnity costs

(4)      The court may order a party to pay indemnity costs if—

(a)       the party has acted vexatiously, frivolously, improperly, or unnecessarily in  commencing,  continuing,  or  defending a proceeding or a step in a proceeding; or

(b)       the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or

(c)       costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or

(d)       the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or

(e)       the party claiming costs is entitled to indemnity costs under a contract or deed; or

(f)       some other reason exists which justifies the court making an order  for  indemnity  costs  despite  the  principle  that  the

31     Arnold v Fairfax New Zealand Ltd [2016] NZHC 1078 at [19].

determination    of    costs    should   be    predictable    and expeditious.

[81]     The general rule is that indemnity costs are exceptional, and will only be awarded where a party has behaved badly, very unreasonably or is guilty of flagrant misconduct.32

[82]     In Telstra v Commissioner of Inland Revenue, the Commissioner also sought indemnity costs upon Telstra’s discontinuance of the proceedings.  Wylie J observed that there was no dispute in that case that the Commissioner was entitled to costs, but that “normally those costs would be fixed according to scale”.  He could not see any principled basis upon which to order Telstra should pay indemnity costs.  Wylie J also  concluded  that  the  fact  that  Telstra  had  issued  new  proceedings  was  not relevant, given an award of indemnity costs is “confined to costs attributed to unseasonable conduct in the proceedings in which the costs award is made”.  I agree with and endorse Wylie J’s comments.

[83]     While  it  is  clear  that  there  have  been  issues  during  the  course  of  this proceeding caused by Flujo’s delays and failure to comply with the timetable, I am not satisfied that the circumstances justify the making of an award of indemnity costs across the entirety of the proceedings:

(a)      It is not possible on an application such as this for the Court to form a view on the merits of the underlying proceeding.  Nor is it appropriate to speculate on the respective strengths and weaknesses of the parties’ cases.33   And while Courtney J’s observations in her judgment on the interim injunction application were perhaps not a ringing endorsement of  Flujo’s  claim,  her  comments  were  made  in  the  context  of  the

absence  of  particular  evidence  being  available  on  the  interim

injunction hearing.    This is not, therefore, a case where, absent a

32     Telstra New Zealand Holdings Ltd v Commissioner of Inland Revenue (2010) 21 PRNZ 1 (HC) at [65], referring to the Court of Appeal’s judgment in Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400 at [27]–[29].

33     Kroma Colour Prints Ltd v Tridonicatco NZ Ltd (2008) 18 PRNZ 973 (CA) at [12].

substantive  hearing,  the  merits  are  “so  obvious”  that  they  should

influence the costs issue.34

(b)Further, I am not in a position to make a prima facie assessment of whether the rejection of the March 2017 settlement offer was so unreasonable as to justify indemnity costs.  Such an assessment would involve a careful and measured assessment of the settlement offer (and its timing) by comparison with the outcome of a substantive judgment.   Obviously there is no substantive judgment at this time. And for the reasons outlined at (a) above, it would be wrong for me to

speculate on what the outcome of that judgment might be.35

(c)      Finally, late discontinuance cannot itself justify the imposition of indemnity costs across the balance of the proceeding. To the extent an award of costs on discontinuance has a punitive effect, that is already inherent in the presumption contained in r 15.23 that, in the ordinary course, the plaintiff must pay the defendant’s costs of the proceedings to that point.

[84]     I  accordingly  decline  to  grant  indemnity  costs  for  the  entirety  of  the proceedings.

[85]     I am of the view, however, that a contribution to Merisant’s actual costs

incurred in the immediate lead up to the hearing itself is warranted:

(a)      First, Flujo’s conduct which led to the proceedings being discontinued was very unreasonable.  That this was so was made clear by Wylie J when considering Mr Marriott’s application for leave to withdraw and Flujo’s subsequent application to adjourn the proceeding.  As noted earlier, Wylie J described Flujo’s failure to pay Mr Marriott (or at least put  in  place  some  interim  arrangements  that  may  have  enabled

counsel  to  continue  to  act)  as  a  “serious  breach  of  contract  of

34     North Shore City Council v Local Government Commissioner (1995) 9 PRNZ 182 at 186.

35     To the extent any fresh proceedings are resolved in Merisant’s favour, it will presumably at that

stage point to the settlement offer made in March 2017 in the context of any costs application.

retainer”;  the  situation  which  led  to  the  discontinuance  as  having come about  “purely because of [Flujo’s] intransigence”;   and that Flujo was “the author of its own misfortune”.

(b)Second,  on  any view,  a  significant  proportion  of Merisant’s  costs incurred in the immediate lead up to the trial (the “gearing-up” phase) are likely to be wasted.   Mr Marriott quite properly accepted at the hearing before me that there would be wasted costs.  Where costs are wasted  through  the  default  of  the  other  party,  the  Court  has jurisdiction to make an order against that defaulting party in respect of

those wasted costs.36

[86]     For completeness, my view that a contribution to Merisant’s actual costs in this  phase  of  the  proceedings  is  warranted  is  not  influenced  by  Merisant’s submission that Flujo and/or Mr Marriott failed to notify Merisant or the Court earlier of the fact that the trial might be in jeopardy.  First, those were confidential and  privileged  matters  as  between  counsel  and  client.  And  further,  even  if Mr Marriott had raised those concerns with Merisant at some earlier point, unless and until the trial was either adjourned or the proceedings discontinued, Merisant would have no doubt had to continue to gear up for trial, to protect its position in the event the trial went ahead.

[87]     The affidavit evidence filed on behalf of Merisant demonstrates that costs totalling $145,086.77 (excluding GST and disbursements) were incurred during the period 10 April 2017 to 28 April 2017.   Obviously the decision to award wasted costs  will  be  very  case  specific.    Robust  judgment  as  to  the  costs  considered

reasonable in all the circumstances will also often be required.37   Taking into account

the circumstances of the present case, and recognising that some of the pre-trial steps may be able to be utilised in any fresh proceedings, I consider that a 40 per cent

contribution to those immediate pre-trial costs is appropriate.

36     See Fu Hao Construction Ltd v Landco Albany Ltd HC Auckland CIV-2004-404-6608, 23 May

2008; Jeffreys v Morgenstern [2013] NZHC 1361; Marley New Zealand Limited v Skellerup
Rubber Services Ltd [2013] NZHC 3040; Thomson v Earthquake Commission [2015] NZHC

1037.

37     Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZ ConvC 191,873 (CA) at 19,887.

[88]     To ensure there is no “double up” in costs awarded to Merisant, any steps taken by Merisant’s solicitors and counsel and which form a part of the $145,086.77 will need to be excluded from the award of scale costs (see [93] below).  From the invoice material filed on behalf of Merisant, it seems the amount of $145,086.77 included the costs of drafting briefs of evidence; drafting submissions; preparing and serving the common bundle; preparing the defendants’ chronology; and preparing bundles of authorities.   On that basis, steps 30, 32 and 33 from Schedule 3 to the High Court Rules will need to be excluded from the scale costs award to Merisant.

Increased costs

[89]     As an alternative to its claim for indemnity costs, Merisant seeks increased costs on broadly the same grounds as are relied on for indemnity costs.  Similarly, Flujo opposes the grant of cost on an increased basis, for the same reasons already set out above.

[90]     Merisant effectively says that an award of scale costs leaves the defendants prejudiced and would be unfair.

[91]     The circumstances in which increased costs may be awarded are set out in r 14.6(3), which provides as follows:

14.6     Increased costs and indemnity costs

(3)      The court may order a party to pay increased costs if—

(a)       the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

(b)       the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i)       failing to comply with these rules or with a direction of the court; or

(ii)      taking  or  pursuing  an  unnecessary  step  or  an argument that lacks merit; or

(iii)      failing,  without  reasonable  justification,  to  admit facts, evidence, documents, or accept a legal argument; or

(iv)      failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

(v)       failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule  14.10  or some  other  offer  to settle  or dispose of the proceeding; or

(c)       the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or

(d)       some other reason exists which justifies the court making an order for increased costs despite the principle that the determination  of  costs  should  be  predictable  and expeditious.

Analysis on increased costs

[92]     For the same reasons outlined above, I am not minded to award increased costs across the entirety of the proceeding.   In my view, there is no principled basis upon which to do so.   The only exception to this is in respect of the undoubted wasted costs incurred in the immediate lead up to the hearing, in respect of which I have already ordered a contribution to actual costs.

[93] As a result, other than in respect of those steps set out at [88] above (which are encompassed in the order for a contribution to actual costs), I consider scale costs, on a 2B basis, to be appropriate. In my view, the proceedings are appropriately categorised as category 2. Given the nature of these proceedings, and considering the particular steps involved in this case, I do not consider each step warrants being classified as band C. While the proceedings are not simple, nor do the particular steps involved strike me as having been particularly complex or significant such as to warrant band C categorisation. A classification of the various steps as band B is also consistent with prior costs awards in these proceedings.

Disbursements

[94]     Merisant also seeks its disbursements incurred  in the (now discontinued)

proceedings.

[95]     Flujo, does not, in the main, oppose the disbursements sought.   Some are, however challenged.   Having reviewed the schedule of disbursements claimed by Merisant and heard the parties on them, I am  satisfied that Flujo ought to pay Merisant those disbursements set out in Schedule A to this judgment.

Costs of this application

[96]     Merisant has largely been unsuccessful on its application.   My provisional view is that Flujo is entitled to costs on this application, on a 2B basis.

Result

[97]     Merisant’s application to vary the notice of discontinuance is declined. [98]  Flujo is to pay Merisant’s costs as follows:

(a)       Costs of these proceedings on a scale 2B basis (excluding steps 30, 32 and 33 as set out in Sch 3 to the High Court Rules);

(b)      A 40% contribution to Merisant’s actual costs incurred during the

period 10 April 2017 to 28 April 2017, being $58,035.00;

(c)       Disbursements in accordance with Schedule A to this judgment.

[99] If, despite my provisional view set out at [96] above, the parties are unable to agree on costs of this application, costs memoranda (no more than five pages in length) may be filed. Flujo’s memorandum is to be filed 10 working days from the date of this judgment; Merisant’s in a further five working days. Absent an order

otherwise, I will then determine costs on the papers.

Fitzgerald J.

Flujo Holdings Pty Limited v Merisant Company [2017] NZHC 1656 [18 July 2017]

SCHEDULE A – DISBURSEMENTS

Date

Invoice

Description

Amount (GST exclusive

$

23/11/2016

Court filing fee

43.38

20/12/2016

Invoice nos.
18467, 18523,
18525

Streamlined Litigation Support Limited
(discovery software charges0

3,168.90

29/03/2017

Court filing fee

1,269.56

28/04/2017

Bundle Photocopying – 5826 colour pages @ $50 each ($2,913 incl GST)

2,533.04

28/04/2017

Bundle Photocopying 8 816 b&w pages
@ $25 each ($204 incl GST)

177.39

28/04/2017

026682

Auckland UniServices Limited – expert witness – Dr Rick Starr

13,062.50

28/04/2017

Court filing fee

43.48

Total:

$ 20,298.25

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Cases Cited

7

Statutory Material Cited

0