Godfrey Hirst NZ Limited v Commerce Commission

[2016] NZHC 2287

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-002719 [2016] NZHC 2287

UNDER

the Commerce Act 1986

BETWEEN

GODFREY HIRST NZ LIMITED Appellant

AND

COMMERCE COMMISSION First Respondent

CAVALIER WOOL HOLDINGS LIMITED

Second Respondent

NEW ZEALAND WOOL SERVICES LIMITED

Third Respondent

On the papers
Appearances:	J C L Dixon and S D J Peart for Appellant N F Flanagan for First Respondent S J P Ladd and J Q Wilson for Second and Third Respondents
Judgment:	27 September 2016

JUDGMENT OF GILBERT J [COSTS]

This judgment is delivered by me on 27 September 2016 at 12 pm pursuant to r 11.5 of the High Court Rules.

..................................................... Registrar / Deputy Registrar

Solicitors:

Chapman Tripp, Wellington

Merediths, Auckland

Bell Gully, Auckland
Counsel:

J C L Dixon, Auckland

GODFREY HIRST NZ LTD v COMMERCE COMMISSION & ORS – COSTS [2016] NZHC 2287 [27 September 2016]

Introduction

[1]      In a judgment delivered on 8 June 2016, the Court dismissed Godfrey Hirst’s appeal  against  a determination  of the Commerce Commission  granting Cavalier authorisation pursuant to s 67(3)(b) of the Commerce Act 1986 to acquire control over the wool scouring business and assets of New Zealand Wool Services International Ltd.1  This judgment deals with outstanding costs issues.

The issues

[2]      There are three areas of disagreement:

(a)      whether band B or band C should be applied to two of the steps, commencement of response to appeal and preparation of written submissions;

(b)the costs that should be allowed for preparation of transcripts of interviews which formed part of the case on appeal; and

(c)      whether Godfrey Hirst is entitled to costs on its successful stay application pending appeal.2

Issue 1 – appropriate band

[3]      Cavalier and the Commission seek costs for commencement of response to appeal and preparing written submissions on a band C basis.  They argue that these steps involved more than the normal amount of time.  Godfrey Hirst disagrees.  It submits that this was a relatively straightforward appeal, conducted on the basis of the record and limited to clearly defined issues.

[4]      The hearing took place over five days and raised a number of difficult legal and factual issues.  In my view, the steps in issue would have required significantly more time than the amount assessed in accordance with band B of half a day and

three days respectively.  I consider that band C is appropriate for these steps.

1      Godfrey Hirst NZ Ltd v Commerce Commission & Ors [2016] NZHC 1262.

2      Godfrey Hirst NZ Ltd v Commerce Commission & Ors [2015] NZHC 3061.

Issue 2 – preparation of transcripts

[5]      One of the  grounds  of  Godfrey Hirst’s  appeal  was  that  the Commission underestimated the likely price increases if the acquisition proceeded.   In order to complete  the  record  so  that  this  aspect  of  the  appeal  could  be  argued  fully,

19 recorded  interviews   conducted  by  Commission   investigators   with   various merchants had to be transcribed.   Cavalier prepared 13 of the transcripts and the Commission prepared the other six.  The Commission then reviewed the transcripts for accuracy and prepared the final versions in conjunction with Cavalier.  This was a time consuming exercise for which the Commission claims two days and Cavalier, one day.  Counsel advise that the amounts claimed represent a fraction of the actual costs incurred by their respective clients in preparing the record.

[6]      Godfrey Hirst makes three points in opposing these costs.  First, it says that it offered to provide copies of transcripts it had prepared in the event that it elected to pursue this aspect of the appeal.   Godfrey Hirst claims that the respondents unnecessarily incurred the cost of preparing the transcripts before it had completed its review.  Second, Godfrey Hirst claims that the Commission should have prepared these transcripts during the course of its investigation.  Third, Godfrey Hirst argues that the costs claimed for preparing the transcripts is excessive.  It suggests that this was essentially a secretarial task and that any review for accuracy should have been carried out by junior staff.   If any costs are allowed for this step, Godfrey Hirst contends that these should be limited to one day.  The amount in dispute is $6,600 for the Commission and $3,300 for Cavalier.

[7]      I do not accept Godfrey Hirst’s submission that the Commission had a responsibility to prepare these transcripts as part of its investigation.  Interviews of this nature are not always transcribed and file notes are commonly relied upon.  The full transcripts were only required because of Godfrey Hirst’s appeal.

[8]      Godfrey Hirst could have avoided the costs now claimed by providing the transcripts which it prepared after lodging its appeal.  Mr Flanagan wrote to Mr Peart on 16 December 2015:

It seems to me pointless for the Commission to prepare transcripts if you already have them, especially since any you rely on will have to be provided to us in due course anyway.

Mr Peart replied on 19 January 2016:

We’ve discussed your request and taken instructions.  The transcripts are our internal work product, so in the event we seek to reply upon them we will of course disclose them, but otherwise we are not intending to.

[9]      The Commission invited Godfrey Hirst to reconsider and said that it would seek to recover the additional costs it would incur by having to prepare separate transcripts for the case on appeal.  This was explained by Mr Flanagan in his email to Mr Peart on 28 January 2016:

Your client’s position is very disappointing.  It is a given that the transcripts are your client’s work product, and that it will hand them over if you rely on them.  The question is why your client is not prepared to take the simple and practical step of providing the transcripts so that they can be agreed and included in the Record, which would reduce the costs of this appeal with no downside that we can see, and no reason has been given

We have agreed with Bell Gully’s clients that they and the Commission will jointly prepare transcripts and put them in the Record.  We record that the Commission will seek to recover the additional costs that the Commission has been put to by having to proceed in this way if an issue of costs arises on the appeal.

[10]     Godfrey Hirst maintained its position, as was confirmed by Mr Peart in his reply to Mr Flanagan on 3 February 2016:

The   need   to   prepare   these   transcripts   was   brought   about   by   the Commission’s failure to prepare them during the course of its investigation and its unwillingness to prepare and disclose them in conjunction with the issue of its second draft determination (or at any point thereafter), despite them forming a significant underpinning of the Commission’s reasoning.  In fact, the Commission was prepared at the time of the second draft determination to share only file notes of the interviews, which put Godfrey Hirst at a severe disadvantage when drafting its submissions.  Our position is that   the   Commission  ought   not  to   have  relied  in  its  second   draft determination on evidence that it was not prepared to share with us.  Had the Commission provided transcripts at that stage, no question of costs would now arise.

We have now, at Godfrey Hirst’s considerable expense, prepared our own transcripts so that we can have a full view of the evidence that the Commission relied upon in its second draft and final determinations.  That was properly the Commission’s responsibility rather than our client’s, but in the interests of prosecuting its appeal swiftly Godfrey Hirst has decided to

incur that cost immediately rather than wait for the Commission to provide the relevant material in the record.

Against that background, Godfrey Hirst’s position is entirely reasonable. Conversely, the suggestion that Godfrey Hirst, having paid for transcripts to be  prepared  for  its  own  use,  should  also  be  required  to  meet  the Commission’s costs in preparing the record of the Commission’s own evidence, is unsupportable.

[11]     There was further correspondence on the issue but it is not necessary to refer to it.  The short point is that these transcripts had to be prepared to complete the case on appeal.  The Commission and Cavalier are entitled to a reasonable allowance for the  costs  of  preparing  them.    Godfrey  Hirst  could  have  avoided  this  cost  by providing copies of the transcripts but it chose not to.

[12]     The amounts claimed appear to be reasonable and are only a fraction of the actual costs involved.  This is consistent with Mr Peart’s email on 3 February 2016 advising that Godfrey Hirst had incurred “considerable expense” in preparing the transcripts.  I consider that these claims should be allowed.

Issue 3 – costs on stay application

[13]     Godfrey Hirst seeks costs against Cavalier in the sum of $9,905 calculated on a   category   3,   band   B   basis   for   its   successful   application   for   a   stay   of the Commission’s determination pending the appeal.  Cavalier submits that no costs should be allowed because the appeal was dismissed.

[14]     I accept Godfrey Hirst’s submission that it is entitled to costs on the stay application.   It succeeded on that application which was necessary to preserve its right of appeal.   It is clear that Cavalier would have completed the acquisition immediately following release of the Commission’s determination if the stay had not been granted.  In that event, Godfrey Hirst’s appeal right would have been worthless. Cavalier should meet the costs involved in unsuccessfully opposing this application.

Result

[15]     The Commission is entitled to costs against Godfrey Hirst on the appeal calculated in accordance with schedule 1 of the joint memorandum of counsel for the respondents dated 8 September 2016.

[16]     Cavalier is entitled to costs against Godfrey Hirst on the appeal calculated in accordance with schedule 2 of the joint memorandum of counsel for the respondents dated 8 September 2016.

[17]     Godfrey Hirst is entitled to costs against Cavalier on the stay application calculated in accordance with schedule 3 of the memorandum filed on its behalf

dated 23 September 2016.

M A Gilbert J