Gavey v Hay HC Christchurch CP37/99

[2001] NZHC 261

IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY CP37/99

BETWEEN RICHARD GAVEY
Plaintiff

AND GEOFFREY EDWIN JOHN HAY
First Defendant

AND TRANSFORMER AND COIL WINDING SYSTEMS LIMITED
Second Defendant

AND PETER RICHARD COUGHLAN
Third Defendant

AND ANDREW CHARLES RENTON
Fourth Defendant

Date: 6 April 2001

JUDGMENT AS TO COSTS OF CHISHOLM J

Solicitors:
Young Hunter, Christchurch for Plaintiff
Mackintosh Bradley & Price, Christchurch for First, Second & Fourth Defendant
Cavell Leitch Pringle & Boyle, Christchurch for Third Defendant

[1] It is alleged by the plaintiff that the defendants have infringed his copyright in a computer programme concerning the design of transformers. The second defendant, a former employer of the plaintiff, issued a counterclaim against the plaintiff alleging infringement of its copyright, breach of contract and conversion. The plaintiff is legally aided.

[2] Given the commercially sensitive nature of the programmes in issue the parties agreed upon constraints that were to apply on inspection. Amongst other things each party was only entitled to take and retain one copy of the inspected documents. No other copies were permitted. Appropriate undertakings were lodged with the Court and orders in terms of the agreement and undertakings were made on 19 July 1999.

[3] On 13 March 2000 the plaintiff made application to have the first and second defendants committed for contempt on the grounds that the first defendant had deliberately copied information arising out of inspection from his laptop computer onto at least one personal computer used by the second defendant. It was alleged by the plaintiff that such information had been subsequently used by the second defendant in its business operations. Within a short time the first defendant, who is the managing director of the second defendant, had acknowledged by affidavit that the undertaking and Court orders had been breached but he denied that the copied material had been used for the second defendant’s business operations. An explanation was provided.

[4] A back up fixture for the hearing of the contempt application was allocated for 14 and 15 February 2001. However, at the beginning of February counsel for the plaintiff advised that the plaintiff was not in a position to fund the contempt application any further with the result that the application was withdrawn by leave. Costs in excess of $22,000 have been incurred by the first and second defendants in relation to the contempt application and associated matters and they now seek to have costs fixed in the sum of $8,000.

[5] Although the plaintiff is legally aided, his aid for the contempt application was capped. Nevertheless he was authorised to supplement the aid by private funding. After funding of $5,336.01 had been injected from a family source that source ran out and the plaintiff was not in a financial position to pursue the contempt issue any further (although it seems that legal aid funding is still available for the substantive proceeding). Apart from a very modest equity in his home the plaintiff has minimal assets and he is unemployed. He has two dependent children.

[6] Although the Legal Services Act 2000 only came into force on 1 February 2001 it is common ground that the issues arising in this case should be determined with reference to that legislation. Section 40 provides:

“40. Liability of aided person for costs- (1) Subject to subsection (2), if a person (in this section, the aided person) receives legal aid for civil proceedings, the aided person’s liability under an order for costs made against him or her with respect to the proceedings must not exceed the amount (if any) that is a reasonable one for the aided person to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.

(2) Except in exceptional circumstances, the amount that the aided person is liable to pay under any such order for costs must not exceed the amount of the contribution that the aided person is required to make under section 15(1)

. . .”.

Mr Hlavac claims that on a literal reading of this provision any order for costs should be restricted to the plaintiff’s contribution of $50 unless there are exceptional circumstances. On his analysis no exceptional circumstances have been demonstrated. On the other hand Mr Weston QC notes that nothing in the Act expressly covers the situation where a limited grant of aid is topped up from outside sources. And he submits that it could not have been the intention of the legislature that a legally assisted person could avoid all costs consequences in this type of situation.

[7] In my opinion the plaintiff qualifies as an “aided person” (as defined in s 4) notwithstanding that his limited grant of aid has been topped up from private sources. The topping up had to be approved by the legal aid agency, otherwise it would have contravened s 66. Throughout the agency has retained control over the situation and the aided person is still subject to all relevant obligations imposed by the Act. Under those circumstances I find it difficult to accept that an authorised topping up from outside sources is capable of negating the plain wording of s 40. It follows that s 40 applies and any orders in favour of the defendants will be limited to the plaintiff’s contribution of $50 unless there are “exceptional circumstances” in terms of subs (2) and if there are exceptional circumstances any order must be a reasonable one in terms of subs (1). So the first issue is whether there are “exceptional circumstances” in this case.

[8] The first and second defendants contend that the plaintiff’s conduct was unsatisfactory. They are particularly critical of the plaintiff’s “wild goose chase” in seeking further discovery despite the fact that very early in the piece the first defendant had admitted a breach of the Court order. Mr Weston notes that a substantial proportion of the defendants’ costs were generated by this futile attempt to secure further discovery which was ultimately abandoned by the plaintiff. It can be inferred that the proposed order for costs has been pitched at a level which would recompense the first and second defendants for their expenditure on the further discovery aspect.

[9] In response the plaintiff maintains that in all the circumstances he was entirely justified in taking steps to have the first and second defendants committed for contempt. Mr Hlavac also contends that further discovery for the purpose of ascertaining why the copies had been taken and retained and whether they had been used for commercial purposes was equally justified. He reminds the Court that the issue of further discovery was debated and that in its decision of 5 May 2000 the Court concluded:

“. . . the plaintiff is entitled to the benefit of full information before the contempt application is heard. That application may involve a testing of the statements contained in the affidavits, including Mr Hay’s statement that he has not used the files obtained in August 1999 for the purpose of designing transformers. From the plaintiff’s point of view that is an important issue and he is entitled to full information relating to that issue before the application for contempt is heard.”

Mr Hlavac also emphasises that the decision to finally abandon the contempt application did not reflect the merits of the application, rather it was a direct consequence of the refusal of the legal aid agency to provide any further funding and the plaintiff’s inability to do so privately.

[10] While the circumstances surrounding the application for costs are certainly unusual, I am not satisfied that they qualify as “exceptional” in terms of subs (2). As indicated by the use of that word the legislature has deliberately set a high threshold before an aided person can be required to pay an amount exceeding the aided person’s contribution. In my assessment the circumstances of this case fall short of satisfying that threshold. The plaintiff cannot be criticised for launching his contempt application which included applications for further discovery and inspection. Having been hotly contested from the outset, the further discovery/inspection component of the application was resolved in favour of the plaintiff by the interlocutory decision of 5 May. Given that decision the plaintiff can hardly be criticised for pursuing discovery even though that course was ultimately abandoned. It is also relevant that the contempt application was ultimately discontinued on account of lack of funding. This continuation cannot be interpreted as an acknowledgment by the plaintiff that the application was not justified. When all these circumstances are taken into account I am not satisfied that there are “exceptional circumstances” justifying an award beyond the plaintiff’s contribution of $50.

[11] Even if the first and second defendants had been able to surmount the exceptional circumstances threshold, I cannot see how they would have achieved a more favourable outcome under subs (1). That subsection specifies that the aided person’s liability for costs must not exceed the amount that is a reasonable one for the aided person to pay having regard to all the circumstances, including the means of the parties and their conduct in connection with the dispute. When determining the amount that it is reasonable for the aided person to pay the Court must take into account the means of the parties and their conduct. In this case the plaintiff is impecunious and an award of any significance might well lead to bankruptcy. No information is available as to the financial situation of the first and second defendants. All that can be said is that they are not legally aided. On the information available the means of the parties does not favour a significant order. And for reasons already expressed the conduct of the parties in connection with the contempt aspect must also favour the plaintiff. In the end result therefore it could not be said that an order exceeding the plaintiff’s contribution would be a reasonable one for the aided person to pay having regard to all the circumstances.

[12] The first and second defendants are entitled to costs against the plaintiff on the contempt and associated applications in the sum of $50. That sum is to be paid forthwith.