Intercity Group (NZ) Limited v NakedBus NZ Limited
[2014] NZHC 1299
•10 June 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-007532 [2014] NZHC 1299
BETWEEN INTERCITY GROUP (NZ) LIMITED
Plaintiff
AND
NAKEDBUS NZ LIMITED Defendant
Hearing: On the papers Counsel:
JD McBridge and PT Hall for Plaintiff
MC Harris and BA Tompkins for DefendantJudgment:
10 June 2014
JUDGMENT OF ASHER J (Costs)
This judgment was delivered by me on Tuesday, 10 June 2014 at 1 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
Simpson Western Lawyers, Auckland.
Gilbert Walker, Auckland. JD McBride, Auckland.
INTERCITY GROUP (NZ) LTD v NAKEDBUS NZ LTD [2014] NZHC 1299 [10 June 2014]
[1] It is necessary to determine costs following my judgment of 12 February
2014 in which I held that InterCity Group (NZ) Ltd (ICG) had proven that Nakedbus NZ Ltd (Nakedbus) had infringed its trademark, carried out the tort of passing off and engaged in misleading and deceptive conduct.1 The parties have now exchanged submissions on costs.
[2] ICG seeks category 3 costs against Nakedbus of $139,356 together with increased costs uplifted by 25 per cent and disbursements of $82,893.01. It seeks a band C time rating for a number of steps. Its claim for costs includes the costs of ICG’s unsuccessful interim injunction claim against Nakedbus, where Rodney
Hansen J refused ICG’s application for interim relief.2
[3] Nakedbus in response submits that, while on the basis of the decision it is appropriate for costs to be awarded, that costs award should be on a category 2B basis. Those costs should be reduced by 20 per cent to account for matters on which ICG did not succeed. It submits that there should be no uplift, that costs of the interim injunction should lie where they fall, and that some of the disbursements should be reduced.
Costs category
[4] The first issue is whether the costs category should be category 2 or category 3. The two categories are described as follows:3
Category 2 proceedings Proceedings of average complexity requiring counsel of skill and experience considered average in the High Court
Category 3 proceedings Proceedings that because of their complexity or significance require counsel to have special skill and experience in the High Court
[5] In essence ICG submits that the proceedings were complex and significant as they involved novel legal issues and concerning new technologies.
1 InterCity Group (NZ) Ltd v Nakedbus NZ Ltd [2014] NZHC 124.
2 InterCity Group (NZ) Ltd v Nakedbus NZ Ltd [2013] NZHC 379.
3 High Court Rules, r 14.3.
[6] The facts of the case were not complex. There was no doubt about the broad sequence of events, and the disputed areas of fact and credibility in relation to the activities of Nakedbus and its intentions were of the type that commonly arise in civil litigation.
[7] The unusual and difficult feature of the case was that it involved an application of trademark law and other intellectual property principles to the purchase, display and use of Google advertisements, a new area of technology and marketing. The factual background as to how Google operated, while novel, was not in contention or inherently complex.
[8] The application of established legal principles to new areas of technology or practice commonly arises in litigation. While it could be said that the case presented a challenge for that reason and was therefore significant, in my view that is not the type of complexity or significance that is envisaged for category 3 proceedings. These proceedings were not complex in the way that, for instance, large scale taxation cases or technical Commerce Act proceedings can be complex, or in the way that commercial disputes involving multiple parties and intricate commercial dealings can be complex. Nor are they significant in the way that a claim for a very large sum of money, or a major public law judicial review claim can be significant. I do not consider the fact that the proceeding requires the determination of a novel and difficult point alone will elevate a costs category from category 2 to category 3.
[9] The costs categorisation of the proceedings by the parties in the lead up to the hearing is relevant to my consideration. As Nakedbus points out, ICG nominated category 2 as the appropriate costs category on three occasions prior to the hearing. Although those nominations cannot be regarded as objective, because ICG was in jeopardy for costs on those occasions, they are relevant. A successful party’s advocacy for a particular category is somewhat weakened when a different category was advocated by that party when the shoe was on the other foot. It must be assumed that at those earlier points in the proceeding ICG considered that the category 3 threshold was not crossed.
[10] I do not accept the submission of ICG that trade mark disputes are typically classified in category 3. As Mr Harris on behalf of Nakedbus has pointed out in his submissions, there have been many cases in which trade mark disputes have been typically classified as category 2 by this Court,4 and where in the Court of Appeal standard costs have been ordered.5
[11] I conclude that the appropriate category is category 2.
Time bands
[12] Whereas the categorisation of proceedings under r 14.3 applies to proceedings generally, the appropriate determinations of reasonable time are considered in relation to specific steps rather than the overall proceeding. ICG has claimed band “B” for some steps and band “C” for others. A determination of what is a reasonable time for a step taken in the proceedings is made by reference:6
(b) to band B, if a normal amount of time is considered reasonable; or
(c) to band C, if a comparatively large amount of time for the particular step is considered reasonable.
(emphasis added)
[13] I have already stated that in relation to the hearing there were no issues of unusual factual complexity. There were no factual issues that would have required a large amount of time in comparison to other civil proceedings. The fact that the proceeding did involve a novel point in applying established legal principles to a set of facts arising out of new technologies, and involving a large amount of European case law that had to be considered, would have meant that some more time than might usually be expected was spent in preparing for the hearing and in final
submissions.
4 For instance, Unilever PLC v Commissioner of Trade Marks HC Wellington CIV-2006-485-
1208, 20 July 2007; and Merial v Virbac SA [2013] NZHC 2773.
5 Fast Future Brands Pty Ltd v Valleygirl New Zealand Ltd [2013] NZCA 615; Geneva Marketing (1998) Ltd v Johnson & Johnson [2009] NZCA 591; Roby Trustees Ltd v Marks New Zealand Ltd [2012] NZCA 450.
6 High Court Rules, r 14.5(2).
[14] A party must demonstrate why a normal amount of time for a particular step would be insufficient.7 The statement of claim was a 10 page document (band C is claimed for that) and the conference memorandum was four and a half pages (band C is claimed for that). I do not accept that those claims and most other category C claims are warranted.
[15] I will, however, accept some uplift to category C to reflect the extra amount of work that had to be done to deal with the complexities arising from the novel point of law and the significant number of European authorities. Any determination in the exercise of my discretion has to be to an extent arbitrary. The way I choose to exercise my discretion is to allow category C for the preparation for hearing. This will involve therefore a claim for five days totalling $14,700 in relation to that particular step.
Uplift from scale
[16] Both parties seek a variation from the standard costs order in favour of a successful party.
[17] ICG seeks an increase of 25 per cent on the costs that would otherwise be ordered. This is on the basis that Nakedbus had not been “honest with this Court at the outset about the de minimis effect of interim relief, and the fact of actual confusion in the market”. ICG submits that the interim injunction would have been ordered by Rodney Hansen J (rather than declined as it was) if the correct information had been provided. It submits that it had to go to considerable expense in procuring evidence addressing issues that ultimately were not contested, or in pursuing the contentions of Mr Nuttall, the principal of Nakedbus, that were ultimately not credible. There were allegations of Nakedbus being less than honest, and it being necessary to call factual material on issues that ultimately proved to be admitted. Reference was made to concessions made by Mr Nuttall under cross-
examination and other denials by Mr Nuttall that were held to be not credible.
7 Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZCA 544, (2007) 18 PRNZ 743 at
[35].
[18] While these points have validity, it is often the case that an unsuccessful party’s evidence has not been accepted by the Court in certain areas. A situation will often arise where a point that takes a considerable amount of time and appears to be at issue is in the end shown to be of little moment when the evidence has come out and has been analysed. This is part of the give and take of litigation. I am mindful of r 14.6(3)(b)(iii), but being proven wrong on a denied fact does not without more warrant an increase. If that were so there would be an increase against unsuccessful parties for most actual adverse findings. The fact that the defendant has failed is reflected in the overall costs award. There was nothing unusual or exceptional arising in this case that warranting an increase in costs.
[19] There is also a “swings and roundabouts” factor. While ICG has some points supporting an increase in costs, Nakedbus also has some points supporting a reduction, which are considered next. In my assessment there is an element of them cancelling each other out.
Reduction in costs
[20] Nakedbus submits that ICG failed on causes of action that contributed unnecessarily to the costs of appearing for and conducting the successful claims, and that a reduction from scale is appropriate.
[21] Prior to the hearing beginning, ICG had abandoned a cause of action based on breach of an oral undertaking, but nevertheless led evidence of the undertaking being given. It was my conclusion in my decision that no undertaking had been given.
[22] More significantly, the cause of action based on the purchase by Nakedbus of key words was held not to be an infringement because at that stage in the process the word or words “inter city” were not being used as a trade mark.
[23] I accept that on occasions Judges will in their discretion reduce a successful plaintiff’s costs because of failure on certain causes of action. The question is whether this is appropriate in this case.
[24] From an overall perspective ICG was successful in this litigation. It achieved its objective of stopping Nakedbus from placing advertisements which effectively utilised the goodwill in the InterCity name. I do not think that there was any significant increase in the time spent on the evidence relating to the failed cause of action. This is because it would have been necessary to traverse very fully the background to the advertisements being displayed on Google in any event. I do accept the submission of Nakedbus that there was significant research and a good deal of time in submissions devoted to this point. However, any proper examination of the relevant legal background would have included an examination of the European cases on the use of key words. There is also the swings and roundabouts factor that I have mentioned. I am not persuaded that the extra legal work on the point warrants a reduction in the overall costs.
[25] In relation to the breach of undertaking cause of action, that claim had been explicitly abandoned but was traversed as part of the story of the offending. It took little time and was part of the background.
[26] There will be no reduction in costs.
The interim injunction
[27] ICG failed in its interim injunction application.
[28] The fact that it failed in that particular application does not mean that costs should have been awarded against it. No costs order was made at the time. Equally it does not follow from the fact that ICG has been ultimately successful that it must receive costs on the interim injunction application in which it failed.
[29] However, in my view there should be a costs order made in ICG’s favour in relation to that interim injunction application. If Mr Nuttall had in his affidavit made the concession he made in evidence that significant numbers of internet users were using the word “intercity” as a Google search term because they were searching for
ICG,8 the outcome of the interim injunction application might well have been different.
[30] I also bear in mind that Mr Nuttall had asserted in his affidavit opposing the interim injunction that if an injunction was granted Nakedbus would lose estimated income in the region of $37,000 a month. In fact it emerged at the hearing that the revenue at risk was under $5,000 a month. While I note that this was not determinative in Rodney Hansen J’s decision,9 this figure was nevertheless
specifically quoted by the Judge.10 Having quoted that figure His Honour observed
that he was satisfied that issues of quantum as well as liability were best left for trial. It was a serious error to provide incorrect information of this type to the Court.
[31] Taking into account ICG’s ultimate success, the information that has since come to light, and the incorrect evidence of potential lost turnover, in my discretion I consider that ICG should have costs on its failed interim injunction application.
[32] There was nothing unduly complex or involving a comparatively large amount of time, and those costs will be on a 2B basis.
Disbursements
[33] ICG seeks to recover the full costs paid to its experts. This is challenged by Nakedbus. It seeks a reduction of 20 per cent commensurate with a general reduction on account of unsuccessful claims. I reject that submission for the reasons already set out in relation to the claim for a general costs reduction.
[34] Nakedbus also seeks a reduction of the Experian Hitwise invoice by 20 per cent on account of the additional benefit ICG will enjoy by taking out an annual subscription to the service. That appears to me to be a legitimate deduction.
[35] As to the other expert fees, Nakedbus observes that the experts’ invoices are heavily redacted and therefore difficult to assess. That appears to me to be a
8 InterCity Group (NZ) Ltd v Nakedbus NZ Ltd, above n 1, at [123].
9 InterCity Group (NZ) Ltd v Nakedbus NZ Ltd, above n 2, at [37].
10 InterCity Group (NZ) Ltd v Nakedbus NZ Ltd, above n 2, at [39].
reasonable observation. Few details are provided. If a party wants to claim a disbursement, it must provide sufficient detail to the other side so the claim can be assessed.
[36] If ICG wishes to pursue these claims it should make the full invoices available, unless deletions can be justified on a specific basis, such as privilege. ICG should not be obliged to disclose the nature of the advice it got from its experts, but it should be able to set out in detail the actual attendances so that they can be evaluated. As a general observation, in assessing reasonable fees a loose equivalence between the experts’ costs on both sides can be a useful touchstone.11
[37] I do not have sufficient information to determine the disbursement claims at this point. I would hope that in the light of these indications the parties can agree the quantum of disbursements. I adjourn the issue of the quantum of disbursements for further submissions, if necessary.
Result
[38] ICG is entitled to costs on a 2B basis in relation to all steps including the interim injunction, save for trial preparation where costs are awarded on a 2C basis. There is no uplift or reduction in that 2B award of costs.
[39] The issue of the quantum of disbursements is adjourned for further submissions, if necessary.
……………………………..
Asher J
11 See GHP Piling Ltd v Leighton Contractors Pty Ltd [2012] NZHC 2317, (2012) 21 PRNZ 354 at
[9].
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