Hoyle v Hoyle
[2017] NZHC 1922
•11 August 2017
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2011-454-910 [2017] NZHC 1922
UNDER the Copyright Act 1994 IN THE MATTER OF
Copyright infringement
BETWEEN
DAVID STANLEY HOYLE First Plaintiff
AND
TRANSPREAD INTERNATIONAL LIMITED
Second Plaintiff
AND
PAUL DAVID HOYLE Defendant
On thepapers: Counsel:
N J Scampion and P D M Johns for First and Second Plaintiffs
P Dengate Thrush and G M Richards for DefendantJudgment:
11 August 2017
JUDGMENT OF CLARK J (COSTS)
The substantive actions
[1] In my judgment delivered on 19 December 2016 the plaintiffs were held to have established infringement of the first plaintiff’s copyright and four of the defendant’s five counterclaims were dismissed.1 I noted the plaintiffs’ entitlement to costs. In an earlier judgment I made an order upholding the defendant’s counterclaim and revoking the patent which the first plaintiff alleged had been
infringed.2 Costs were reserved.
1 Hoyle v Hoyle [2016] NZHC 3120 [Infringement Decision].
2 Hoyle v Hoyle [2015] NZHC 3282 [Revocation Decision].
HOYLE v HOYLE [2017] NZHC 1922 [11 August 2017]
The claims for costs
[2] The parties contest strongly each other’s claims for costs. A total of seven memoranda have been filed, the last in June 2017. The plaintiffs claim $270,865.00 being costs of $193,475.00 uplifted by 40 per cent “in recognition of the delay and unnecessary time and costs incurred as a direct result of the defendant’s actions throughout the course of the proceeding”. The plaintiffs seek, also, disbursements totalling $39,614.58.
[3] The defendant’s position is that a decision on costs should be deferred until determination of the defendant’s appeal against the infringement decision. But if costs are to be determined the defendant says the plaintiffs’ assessment of scale costs must be discounted by 50 per cent to reflect the abandonment of the revocation cause of action. The defendant claims costs of $62,826.00 for his successful revocation counterclaim and disbursements totalling $1,347.13.
[4] Each party has annexed to written submissions a schedule itemising steps taken throughout the long life of the proceeding and the disbursements claimed.
[5] The plaintiffs’ claim is calculated on a 2B basis for most steps but in respect of two affidavits of documents and inspection of documents in two of the defendant’s affidavits, costs are claimed on a 2C basis.
[6] The defendant claims his “full costs” for his successful counterclaim seeking revocation of the first plaintiff’s patent on the basis the counterclaim was unreasonably defended.
Applicable Principles
[7] The principles governing the exercise of the court’s discretion are well established. Although costs are at the discretion of the court3 the discretion is not unfettered. In particular the court’s discretion is qualified by rr 14.2–14.17 of the
High Court Rules 2016. There is a strong implication that the court is to apply the
3 High Court Rules 2016, r 14.1.
costs regime in the absence of some reason to the contrary.4 Any departure must be a considered and particularised exercise of the court’s discretion.5 The following principles have particular application to the costs claims made in this proceeding.
[8] Where a claim and counterclaim are both established the court must award costs as if each party had succeeded in an independent proceeding, unless, in the court’s opinion, the justice of the case otherwise requires.6
[9] The court may refuse or reduce costs otherwise payable under the rules if, although successful overall, the party claiming costs has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs.7
[10] The broad circumstances in which a party may be ordered to pay increased or indemnity costs are set out in r 14.6. Generally speaking a party attracts liability to pay increased or indemnity costs by the way in which the party has conducted the proceeding or steps in the proceeding.
[11] The conduct must be in relation to the proceeding rather than prior to it being commenced.8 The court must assess the extent to which an asserted failure to act reasonably contributed to the time or expense of the proceeding.9 The party claiming increased, or indemnity, costs has the onus of persuading the court that the award is justified.10
[12] Abandonment of a cause of action does not, of itself, justify indemnity costs. Where the claim is abandoned before the trial is completed increased or indemnity costs may be awarded on the basis of lack of merit only where the lack of merit is
both obvious and incontrovertible, “[s]o clearly so that there is no reasonable
4 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7].
5 Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA) at [22].
6 High Court Rules, r 14.16.
7 Rule 14.17.
8 Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160].
9 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24
NZTC 24,500 at [165].
10 Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011 at [27].
possibility that the Court might form a different view with the benefit of all the evidence and closing submissions”.11
[13] A blanket assessment for banding is not desirable and does not accord with the High Court Rules unless it reflects that the case is an average one requiring a normal amount of time for each step.12 Under r 14.3(2) the court may re-categorise a phase of the proceeding if there are special reasons for doing so.13
Should costs be deferred?
[14] I decline to defer my decision on costs. Costs follow the event. The fact an appeal against a judgment is extant does not justify a refusal to pay costs to the successful party in the first instance. The bringing of an appeal does not operate as a stay and, in the absence of an order for a stay, a judgment may be enforced notwithstanding the appeal.14 It will remain open to the defendant (as the party advocating deferment) to seek a stay of enforcement pending the outcome of his appeal if he considers such a course is necessary. The defendant advanced no tenable basis for not applying the costs regime in the usual way.
Defendant’s successful revocation counterclaim
Submissions
[15] The defendant seeks costs on his successful counterclaim for revocation of the first plaintiff ’s patent. He says he is entitled to an uplift in view of the fact the first plaintiff, without reasonable justification, opposed the counterclaim until a short time before trial and then consented to revocation of the patent.
[16] The plaintiffs’ position is that the defendant’s claim for costs and
disbursements should be refused entirely because of failures by the defendant to discover, until November 2014, documents supporting his counterclaim and because
11 N-Tech Ltd v Abooth Ltd [2012] NZHC 1167 at [97] and [108].
12 Commissioner of Inland Revenue v Chesterfields Preschools Ltd, above n 9, at [161], citing
Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZCA 544, (2007) 18 PRNZ 743.
13 As in J v J [2013] NZHC 1822 at [10]–[11] (by the time of trial preparation, complex factual and legal issues had arisen making the original classification “grossly unfair to the plaintiff”).
14 Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85 (CA) at 87.
the first plaintiff ’s belief in the validity of his patent was a reasonable belief.
Mr Scampion submitted if costs are to be awarded they should be in the amount of
$10,746.00 and disbursements of $308.94.
Assessment
[17] The defendant succeeded in his counterclaim for revocation of the patent. He is entitled to his costs in the usual way, that is, as if his counterclaim were a separate proceeding.
[18] But I do not accept the first plaintiff’s defence of the counterclaim was such as to attract indemnity costs. The factual dispute concerned the date on which spreaders, including the patented conveyor, were first sold. The first plaintiff’s recollection of events some 17 years earlier was supported by the evidence initially available and he had taken advice from a patent attorney. He withdrew his opposition to revocation when the evidence was clear the patent was invalid. Specifically:
(a) On 3 September 2015 the defendant’s solicitors provided further evidence of prior use (cheque butts relating to the sale of a spreader in Tasmania).
(b)Twenty days later, two months prior to trial, the first plaintiff confirmed he would consent to an order revoking the patent.
[19] The grounds for an award of indemnity costs are not made out and therefore scale costs are awarded.
[20] I have also disallowed amounts claimed for some steps. In particular the following claims have been significantly reduced:
(a) Costs of $11,940.00 for six days inspecting documents in the
plaintiffs’ third affidavit, calculated on a 2C basis.
(b) Costs of $15,610.00 for seven days inspecting documents listed in the
plaintiffs’ fourth affidavit of documents, calculated on a 2C basis.
[21] In respect of both claims costs are awarded on a 2B basis allowing one and a half days.
[22] I have also allocated one and a half days for the preparation for hearing and one quarter day for attendance at hearing to reflect the unopposed nature of the application and that costs awarded must not exceed costs incurred.15
[23] The defendant is entitled to $27,668.50 costs plus $1,549.20 (GST inclusive)
disbursements on his counterclaim.
Plaintiffs’ costs claim
Submissions
[24] The plaintiffs seek increased costs on the grounds:
(a) They were wholly successful in the copyright infringement claim and
in resisting the defendant’s counterclaims.
(b)Over a four year period the defendant refused to engage meaningfully in settlement discussions and unreasonably rejected settlement offers.
(c) The defendant failed to comply with discovery obligations contributing unnecessarily to the time and expense of the plaintiffs having to pursue further and better discovery.
(d) The defendant filed briefs late.
(e) The defendant’s conduct at trial caused further time and expense to be
incurred.
15 High Court Rules, r 14.2(f).
[25] The defendant opposes increased costs on any grounds. The defendant says the plaintiffs’ assessment of costs should be reduced to reflect the abandonment of the cause of action for infringement of patent. The defendant takes issue with multiple claims for preparing briefs while also claiming an expert’s costs as a disbursement. Similarly the defendant challenges a claim for preparing and filing closing submissions.
Settlement Offers
[26] In support of the submission that the plaintiffs made offers of settlement some 37 pieces of correspondence (all included in the common bundle at trial) were provided as a bundle of key documents relating to costs. The first “cease and desist” letter was written in December 2004. The last of the letters relied on is dated
20 October 2015 and concerns amendment of pleadings, reply evidence and further discovery.
[27] There can be no doubt that the plaintiffs threatened but did not pursue litigation in 2004 and 2005. After proceedings were filed in December 2011, the plaintiffs attempted to settle. For the purpose of the costs dispute the question is whether the defendant’s refusal to settle was unreasonable. In the end, I have not been persuaded that the rejection of the particular offers was unreasonable. The plaintiffs point to their comprehensive success and to the correspondence, addressed to the defendant in 2011 and between 2013–2015, demonstrating the plaintiffs’ attempts to reach a commercially pragmatic settlement, including through mediation.
[28] As Mr Dengate Thrush submitted a common and central theme in the settlement offers was a requirement that the defendant become a licensee of the second plaintiff. At the time the offers were made the defendant was assessing, and rejected, a proposal by which he was to enter into a license arrangement with the second plaintiff. The defendant was entitled to defend his position as he saw it. The claim was strongly contested and required detailed analysis. The fact the defendant was ultimately unsuccessful in defending a claim for damages and injunctive relief for breach of copyright does not make rejection of offers to become a licensee so unreasonable as to justify an award of increased costs.
[29] A proposal to mediate is not in itself sufficient to qualify as an offer of settlement justifying an award of increase costs. An offer to mediate is not an offer to settle, but rather an offer to attempt to settle.
Discovery
[30] The plaintiffs seek increased costs on the basis of delays in discovery. The plaintiffs submit the defendant resisted producing files and denied their existence.
[31] I accept the defendant’s submission that delay was not wholly attributable to the defendant as he did not have ready access to the files and there were confused agreements between the parties as to what would be discovered. There was also delay on the plaintiffs’ part in taking up the defendant’s offer to source files from the defendant’s laser cutters.
[32] There is no evidence of intention to delay or obfuscate to support an award of increased costs.
Late filing of documents
[33] In terms of late filing of documents, memoranda filed on behalf of all parties, particularly through August to November 2015 record delays by all parties in providing briefs of evidence and claims of prejudice and gross delay were made by both counsel. I find nothing in this ground to support an award of increased costs.
Unnecessary contribution to time and expense at the trial
[34] The trial was set down for 10 days. It occupied 12. The plaintiff attributes the additional time to the defendant’s conduct of the proceeding and his demeanour giving evidence. Except in one respect (which I come to) that is not how I see it. I was concerned from the earliest days that insufficient time had been sought and allocated for the trial. I also considered that the discovery issues raised on the first day of trial might have been raised earlier. As recorded in the judgment my initial
impression was that the matter was barely ready for trial.16 That, coupled with the fact that ten days was inadequate, contributed to the hearing running over time.
[35] The next point concerns the unpleaded defences. In closing Mr Scampion submitted the plaintiffs had been “irretrievably prejudiced” by the defendant being permitted to argue a case that was different from its pleaded case. The way in which the pleadings issues arose is detailed in the judgment.17 The plaintiffs submit the pursuit of unpleaded defences entitles them to increased costs particularly as the defences lacked merit.
[36] I do not accept the defendant’s submissions that pursuit of the unpleaded defences was not so procedurally or substantively meritless as to justify an award of increased costs. It was necessary that the affirmative defences be pleaded. They were not. The defendant relies on my observation that, by the defendant’s denials, the plaintiffs were put to proof and were required to establish originality and
ownership.18 That is a different proposition from the defendant seeking to advance
and rely on his positive case against originality and ownership. Four amended statements of defence were filed between July 2012 and April 2015. There was ample opportunity to plead the affirmative defences foreshadowed in Mr Dengate Thrush’s opening. Contrary to established principle, and without apparent reason, the defences were not pleaded.
[37] This aspect of the defendant’s conduct of the trial unnecessarily inconvenienced counsel for the plaintiffs and I have no doubt contributed to additional time and expense, not to mention lengthening the hearing. The defences were found to be meritless and the plaintiffs have established a basis for increased costs in this limited respect.
[38] Increased costs are typically awarded as a percentage uplift from scale. I consider an uplift of 50 per cent from scale costs in respect of senior counsel’s appearance for 12 days is proper. Whether scale costs are uplifted by 50 per cent or
whether, instead, the step is calculated on a 2C basis (totalling a potential award of
16 Infringement Decision, above n 1, at [46].
17 At [51]–[63].
18 At [62].
$39,600.00 for appearance) the difference is around $540.00. I have preferred a percentage uplift as that approach more aligns with principle.
[39] I decline to award increased costs on the basis of my observations concerning the defendant’s responses during cross-examination. My assessment of the defendant’s evidence was relevant to its reliability. The fact I found the defendant’s demeanour and evidence at times to be unhelpful does not establish a ground for increased costs.
[40] The defendant disputes the plaintiffs’ three claims for “preparation of the plaintiffs’ briefs of evidence”. The defendant submits this is contrary to the intention of the time allocations which is to cover preparation for all briefs for trial.
[41] I am satisfied the seven and a half days claimed for preparation of all briefs, including expert briefs, is appropriate. The plaintiffs are entitled to their three claims for the preparation of briefs.
[42] The defendant objects also to the plaintiffs’ claim of a substantial disbursement in respect of the expert’s (Neil Rogers and Associates) costs on the basis that the costs are already covered by the claim for preparation of briefs of evidence.
[43] A costs award reflects the solicitors’ time involved in giving guidance, advice and supervision to the experts when preparing their briefs.19 Disbursements are additional to costs awards. A successful party is entitled not only to costs but to recover reasonable disbursements.
[44] The plaintiffs claim an additional allocation of 1.5 days for the preparation and filing of closing written submissions. The defendant says it is not usual to claim an additional allocation for a deferred closing — such costs are accommodated in the
“preparation for trial” or “appearance at hearing” allocations.
19 See Southland Indoor Leisure Centre Charitable Trust v Invercargill City Council [2016] NZHC 41 at [22].
[45] The uplift of 50 per cent which I have allowed in respect of the claim for counsel’s appearance at hearing satisfactorily recognises the additional time and expense to the plaintiffs caused by the defendant relying on unpleaded defences at trial. Consequently, I disallow the claim of $3,345.00 for preparation and filing of closing submissions.
[46] The defendant sought a 50 per cent reduction for the plaintiffs’ steps taken between 19 December 2011 and the filing of the third amended statement of claim. Counsel acknowledges the assessments of reduction are necessarily impressionistic.
[47] The plaintiffs correctly submit the defendant’s position overlooks that until the defendant’s further discovery in November 2014 the defendant’s allegations of prior use were unsupported and in contrast to the first plaintiff’s firm recollection of events. It was appropriate for the cause of action to be maintained until such time as it became clear to the first plaintiff it was not tenable.
[48] It seems reasonably clear to me that the steps taken between commencement of the proceeding in December 2012 and April 2015 related primarily to case management. I do not consider a percentage reduction from scale costs for these steps is warranted.
Outcome
[49] The plaintiffs’ claim of $193,475.00 is adjusted in the following two respects:
(a) The claim for 1.5 days ($3,345.00) for closing submissions is disallowed.
(b) Scale costs for appearance ($26,760.00) is uplifted by 50 per cent.
[50] The defendant is to pay the plaintiffs’ costs of $203,510.00 and disbursements totalling $45,556.77 (GST inclusive).
[51] This is to be offset by the costs I award to the defendant on his successful
counterclaim of $27,668.50 costs plus $1,549.20 (GST inclusive) disbursements.
Karen Clark J
Solicitors:
Baldwins Law Ltd, Auckland for the Plaintiffs
McCabe and Company, Wellington for Defendant
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