Intergroup Limited v Pipe Vision NZ Limited
[2024] NZHC 977
•30 April 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV- 2023-404-002993
[2024] NZHC 977
BETWEEN INTERGROUP LIMITED
Plaintiff
AND
PIPE VISION NZ LIMITED
Defendant
Hearing: On the papers Appearances:
B D Gustafson for Plaintiff
C E Harris and A Davison for Defendant
Judgment:
30 April 2024
JUDGMENT OF ANDERSON J
[Costs judgment]
This judgment was delivered by me on 30 April 2024 at 11.00 am pursuant to r 11.5 of the High Court Rules 2016.
.…………………………..
Registrar/Deputy Registrar
Solicitors: Speakman Law, Auckland
Jackson Russell, Auckland
INTERGROUP LTD v PIPE VISION NZ LTD [2024] NZHC 977 [30 April 2024]
Introduction
[1] InterGroup Ltd1 filed proceedings against Pipe Vision NZ Ltd2 for inducing breach of contract and interference with contractual relations. Pipe Vision protested this Court’s jurisdiction. On 13 February 2024 I upheld Pipe Vision’s protest and dismissed InterGroup’s proceeding on the basis that InterGroup’s claim was within the exclusive jurisdiction of the Employment Relations Authority.3
[2]The parties have been unable to agree as to costs.
[3] Pipe Vision seeks costs on a 2B basis and disbursements. It submits that 2B costs should be uplifted by 50 per cent for all steps excluding the costs associated with a vacated “interim interim” hearing for which a 75 per cent uplift is sought. In total it seeks $37,642.50. InterGroup submits only $10,157.50 is recoverable.
Background
[4] I need to traverse the procedural background in detail to address some of the issues in dispute.
[5] On 14 December 2023 InterGroup filed its proceeding in the High Court along with an application seeking an interim injunction against Pipe Vision.
[6] On 18 December 2023 the matter was called in the Duty Judge List before Lang J. Lang J allocated a hearing date of 9 May 2024 and made timetabling directions accordingly. He directed:4
(a)Pipe Vision was to file and serve documents in opposition to the application no later than 31 January 2024;
(b)InterGroup was to file and serve reply affidavits (if any) no later than 14 February 2024;
1 InterGroup.
2 Pipe Vision.
3 InterGroup Ltd v Pipe Vision NZ Ltd [2024] NZHC 159.
4 InterGroup Ltd v Pipe Vision NZ Ltd HC Auckland CIV-2023-404-2993, 18 December 2023 (Minute of Lang J).
(c)submissions in support of the application were to be filed and served no later than 26 April 2024; and
(d)Pipe Vision was to file and serve submissions in opposition to the application no later than 2 May 2024.
[7] The parties were further directed that if they were unable to agree on the interim position pending the 9 May 2024 hearing, the matter would be determined before me on Wednesday 20 December 2023 at 11.45 am (the “interim interim” hearing).5
[8] Later that day, Lang J released a second minute advising that the interim position could be determined on 7 February 2024 and asking for confirmation whether counsel could accept that fixture, in which case there would appear to be no need for an “interim interim” hearing.6
[9] On 19 December 2023 at about 3.00 pm both parties filed and served submissions in advance of the 20 December hearing. In these submissions, the Court was advised that the 7 February date was acceptable to Pipe Vision but unacceptable to InterGroup. The parties had proceeded to prepare for the “interim interim” hearing scheduled for 20 December as a result.
[10] Following receipt of those submissions I issued a minute requiring the applicant to advise why counsel was unable to accept a 7 February hearing.7 Counsel for the applicant responded at 4.31 pm the same day advising that alternate representation for a 7 February 2024 hearing had been arranged.
[11] At 10.18 am on 20 December 2023 the parties then filed a joint memorandum advising they had conferred and sought directions by consent that the 11.45 am hearing be vacated on the basis of interim undertakings agreed pending a 7 February fixture date. Included in those orders were that Pipe Vision was to file its opposition and
5 At [2].
6 InterGroup Ltd v Pipe Vision NZ Ltd HC Auckland CIV-2023-404-2993, 18 December 2023 (Minute 2 of Lang J).
7 InterGroup Ltd v Pipe Vision NZ Ltd HC Auckland CIV-2023-404-2993, 19 December 2023 (Minute of Anderson J).
affidavits in support by 26 January 2024. I ordered accordingly. The fixture was allocated for 7 February 2024.
[12] On Wednesday 24 January 2024, Pipe Vision filed a notice of protest to jurisdiction and an application for the proceeding to be dismissed for lack of jurisdiction. On 26 January it filed a further memorandum requesting that its application to dismiss the proceeding be determined before it was required to take steps in relation to InterGroup’s application for interim relief. InterGroup opposed that request.
[13] Pipe Vision did not file and serve its opposition and affidavits in support in accordance with the timetable direction that it was to do so by 26 January 2024.
[14] The matter therefore came before Lang J as Duty Judge on 1 February 2024. Lang J noted that “[t]here had been no suggestion during the discussions that were held in December 2023 that the defendant was proposing to [protest jurisdiction]”.8 He directed that Pipe Vision’s application would be heard at the commencement of the 8 February fixture and that:
(a)InterGroup was to file documents in opposition to Pipe Vision’s application no later than 5 pm on 2 February 2024.
(b)Any affidavits in reply and submissions by InterGroup were to be filed and served no later than 5 February 2024.
(c)Pipe Vision’s submissions were to be filed and served no later than 12 pm on 7 February 2024.
[15] By email delivered at 2.40 pm on 5 February 2024, counsel for InterGroup advised that it would need until the following day (6 February 2024) to file and serve its affidavits in reply. Counsel for Pipe Vision responded by email at 3.24 pm noting concern at the delay due to the compressed timetable and asking for confirmation that:
8 InterGroup Ltd v Pipe Vision NZ Ltd HC Auckland CIV-2023-404-2993, 1 February 2024 (Minute of Lang J).
(a)InterGroup’s submissions would be filed and served on time, as delay with InterGroup’s reply evidence would affect its submissions; and
(b)InterGroup’s reply evidence would be filed and served by 12 pm, 6 February 2024 at the latest.
[16] Counsel for InterGroup did not respond. Instead, by email received at 4.12 pm on 6 February 2024, counsel for InterGroup sent through two unsworn affidavits. It indicated that it would be filing further submissions as to jurisdiction in addition to further submissions in relation to InterGroup’s interim injunction application.
[17] InterGroup filed and served sworn copies of the affidavits and its synopsis of submissions relating both to jurisdiction and the interim injunction application on 7 February 2024.
[18] The protest to jurisdiction and InterGroup’s interim injunction application were heard on 8 February 2024. The protest to jurisdiction was heard first on the basis that if the protest was successful, no decision would need to be issued on the interim injunction application.
[19] On 13 February 2024 I issued my decision upholding Pipe Vision’s protest to jurisdiction. As the protest was successful, I did not issue a decision in relation to InterGroup’s interim injunction application.
Application
[20]Pipe Vision seeks increased costs for five reasons:
(a)InterGroup unnecessarily caused wasted costs by pursuing an unnecessary step, namely the “interim interim” hearing.
(b)InterGroup’s opposition to Pipe Vision’s protest to jurisdiction lacked merit and relied upon an argument that a recent case directly on point was wrongly decided.
(c)InterGroup, without reasonable justification, did not accept a settlement offer from Pipe Vision.
(d)InterGroup failed to comply with the Court’s timetabling directions and filed its evidence and submissions late. This placed Pipe Vision under pressure in an already extremely tight timetable to hearing.
(e)InterGroup raised legal arguments in relation to the protest to jurisdiction for the first time in its submissions filed at 11.31 am the day before the hearing. It then advised counsel and the Court at the hearing that it would not pursue those arguments.
[21] InterGroup submits there is no jurisdiction for the Court to use its discretion and award an uplift.
The law
[22] Costs are at the discretion of the Court.9 The key principles applicable to the determination of costs are set out in r 14.2 of the High Court Rules 2016 and include that the party who fails with respect to a proceeding or interlocutory application should pay costs to the successful party.
[23] Pipe Vision as the successful party is entitled to costs. I must determine the quantum.
Quantification of scale costs
[24] Before addressing whether increased costs are justified, I must first address the quantification of scale costs.
[25] I agree with the parties that 2B costs are appropriate for all steps. The proceeding was of average complexity requiring counsel of average skill and experience.
9 High Court Rules 2016, r 14.1(1).
[26] Pipe Vision submits that 2B costs amount to $24,497.50. InterGroup submits that 2B costs are $10,157.50.
[27] The difference in these calculations arises from steps Pipe Vision claims are recoverable that InterGroup does not. Those are:
(a)Including both step 2 for commencement of defence as well as step 23 (filing opposition to interlocutory application for interim injunction orders) when no statement of defence was filed and those steps cover the same ground.
(b)Three sets of submissions for: the “interim interim” hearing, protest to jurisdiction and interim injunction. InterGroup submits only one allowance for submissions should be included.
(c)Filing memorandum in support of application to dismiss proceeding for lack of jurisdiction, when such application falls within the same step as the filing of the application itself and should not be separately allowed.
(d)Filing memorandum to amend timetable and appearance in Duty Judge List on 1 February which InterGroup submits only arose because of Pipe Vision’s failure to comply with timetable for filing of affidavits opposing the injunction.
(a) Statement of defence and opposition to interlocutory orders
[28] Pipe Vision claims costs for its commencement of defence (step 2) and filing the opposition to interlocutory orders (step 23). However, no statement of defence was actually filed. I accept InterGroup’s submission that Pipe Vision is not entitled to claim for the commencement of defence.10 Although in some circumstances it has been held that a party may recover costs for step 2 even where no statement of defence is filed,11 I do not consider such would be appropriate here.
10 See Regent Trustee Ltd v Pang [2020] NZHC 2855 where Gault J disallowed a claim for commencement of defence because no statement of defence had been filed.
11 Trust v Global Oil Services Ltd [2019] NZHC 3418.
[29] I disallow the $4,780 of scale costs claimed by Pipe Vision for commencement of its defence.
(b) Three sets of submissions
[30] Pipe Vision claims costs for the preparation of written submissions for the “interim interim” hearing, protest to jurisdiction and interim injunction application.
[31] I am of the view that only two sets of submissions should be allowed: one for the (ultimately vacated) “interim interim” hearing and one for the hearing before me on 8 February. Although the “interim interim” hearing did not go ahead, it was only vacated last minute and Pipe Vision was required to prepare submissions in advance.
[32] Pipe Vision is entitled to $7,170 for the preparation of submissions ($3,585 for each set).
(c) Memorandum in support of application to dismiss
[33] Pipe Vision filed a memorandum dated 24 January 2024 in support of its application to dismiss the proceeding. I agree with InterGroup that this memorandum was not filed for a subsequent case management conference or mentions hearing (that being the step claimed) but rather formed part of the application. It was not a separate step and scale costs should not be awarded. There was also a degree of overlap between this and subsequent submissions on the protest.
[34]I disallow $956 of the scale costs claimed by Pipe Vision for this step.
(d) Inclusion of memorandum in relation to timetable and appearance in Duty Judge List regarding the same
[35] Pipe Vision filed a memorandum on 26 January 2024 and appeared in the Duty Judge list on 1 February. It claims scale costs in respect of both. InterGroup submits that Pipe Vision only incurred these costs because of Pipe Vision’s failure to comply with the timetable for the filing of their opposition and affidavits in support. It submits that but for Pipe Vision’s failure to comply the appearance in the list would
not have been necessary and therefore scale costs should not be awarded for those steps.
[36] I accept that these steps were only necessary due to Pipe Vision’s non-compliance with the timetabling directions. Pursuant to r 14.7(f)(i) I disallow
$1,434 in scale costs for these steps.
[37] Taking into account my findings on the above, costs on a 2B basis therefore amount to $13,742.50.12
[38]I now turn to consider whether Pipe Vision is entitled to increased costs.
Increased costs – law
[39]Rule 14.6(3) of the High Court Rules provides:
(3) The court may order a party to pay increased costs if—
…
(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
…
12 $24,497.50 minus $3,585 for the third set of written submissions claimed, minus $4,780 for commencement of defence, minus $956 for the memorandum of 24 January, minus $956 for the memorandum of 26 January and minus $478 for the appearance at the Duty Judge List.
[40] The party seeking increased costs bears the onus of demonstrating such costs are justified.13 Where increased costs are awarded because a claim lacked merit, it will often be appropriate for increased costs to apply to all steps.14
[41] Rule 14.6(3)(b) is concerned with improper or unreasonable steps.15 The unreasonable conduct must be in relation to the proceeding and does not include conduct that took place before the proceeding was commenced.16 Increased costs are not intended to be punitive17 and will not be appropriate where there is some reasonable explanation for the defendants’ conduct.18
“Interim interim” hearing
[42] Pipe Vision prepared written submissions for the vacated “interim interim” hearing. On a scale basis, Pipe Vision is entitled to $3,585 for that step. It seeks an uplift of 75 per cent (totalling $6,273.75) on the basis that, in terms of r 14.6(3)(b)(ii), InterGroup pursuing the “interim interim” hearing was an unnecessary step and caused by counsel’s advice she could not appear on 7 February 2024.
[43] InterGroup submits there is no justification for an uplift because it did not contribute unnecessarily to the time or expense of the proceeding.
[44] I decline to order increased costs for this aspect. I accept InterGroup’s submission that its counsel acted responsibly regarding the “interim interim” hearing in arranging alternative counsel, which was a step taken in response to my minute only after submissions had been filed. Moreover, I agree that because the subject of the hearing was ultimately argued in February, the submissions were not wasted. I note that no issue of protest to jurisdiction had been raised at this point, which is the issue on which Pipe Vision has succeeded.
[45]Accordingly, Pipe Vision is entitled to scale costs of $3,585.
13 Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011.
14 NR v MR [2014] NZCA 623, (2014) 22 PRNZ 636; Broadspectrum (New Zealand) Ltd v Nathan
[2017] NZCA 434 at [57].
15 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].
16 Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160].
17 Wilding v Te Mania Livestock Ltd [2018] NZHC 1506 at [176].
18 Valmar Trustee Ltd v Smart Water Technology [2016] NZHC 1583 at [12].
All other steps
[46] For all other steps Pipe Vision seeks an uplift of 50 per cent. It submits that InterGroup’s position lacked merit and that InterGroup failed without reasonable justification to accept a settlement offer, failed to comply with Court directions and raised new issues on the eve of the hearing.
Lacks merit
[47] Pipe Vision submits that InterGroup’s opposition to Pipe Vision’s protest to jurisdiction relied entirely on two paragraphs of FMV v TZB19 taken out of context and a meritless submission that a recent High Court judgment had been wrongly decided. It submits that InterGroup did not act reasonably in opposing Pipe Vision’s protest to jurisdiction and that an uplift of at least 50 per cent is appropriate in terms of r 14.6(3)(b)(ii).20
[48] InterGroup submits its position did not lack merit. It says Pipe Vision did not raise the protest to jurisdiction until 24 January 2024 after the injunction hearing was allocated for 6 February 2024. The late filing meant there was simply no time to deal with the jurisdiction argument before the hearing. They say FMV v TZB did not unequivocally state what third party claims would still be brought in the High Court and what claims against third parties would be exclusively in the Employment Relations Authority’s jurisdiction.21
[49] The costs regime is premised on the basis that parties succeed and fail. Failure in respect of an application is not sufficient to engage r 14.6(3)(b)(ii). Increased costs are justified for lack of merit only in an obvious case, which falls to be considered under r 14.6(4)(a) for indemnity costs.22 The application of the FMV v TZB is not straightforward. While recent High Court authority on different facts is obviously persuasive, I am not bound by it. InterGroup’s position, while ultimately unsuccessful, was not so strong as to justify an award of increased costs.
19 FMV v TZB [2021] NZSC 102.
20 Carson v Lee [2023] NZHC 1928 in which a 50 per cent uplift on 2B costs across all steps.
21 FMV v TZB, above n 19, at [103].
22 Gough v Strahl [2014] NZHC 1038 at [23].
Failing without reasonable justification to accept an offer of settlement
[50] On 18 January 2024 Pipe Vision made a settlement offer to InterGroup. It offered undertakings in relation to the non-solicitation aspect of a restraint of trade and invited InterGroup to discontinue its proceeding. InterGroup declined. Pipe Vision submits that had InterGroup accepted the offer, it would have been in a better position than it is now because:
(a)it would have substantial undertakings relating to the non-solicitation aspects of the restraint clause which was the subject of the substantive proceeding; and
(b)neither party would have incurred the costs of the formal steps up to and including the 8 February 2024 hearing involving both Pipe Vision’s protest to jurisdiction and InterGroup’s interim injunction application.
[51] Pipe Vision therefore submits that an uplift of 50 per cent is appropriate pursuant to r 14.6(3)(b)(v).
[52] InterGroup submits that it had reasonable justification to decline Pipe Vision’s offer. It says the offer was to settle the entire dispute, including InterGroup’s significant damages claim against Pipe Vision for the loss of a contract which was previously serviced for $15,000 per week and which is now being pursued in the Employment Relations Authority. Had it accepted the offer, InterGroup says it would have been in a significantly worse position than it is now because it would be unable to pursue that claim and another in the Employment Relations Authority.
[53] Whether it was reasonable for a party to reject an offer requires a fact specific enquiry.23 Here I am not satisfied that InterGroup rejecting the offer was unreasonable. The ability to pursue its claims in the Employment Relations Authority is significant. The offer would have prevented it from pursuing that route. It is not unreasonable for InterGroup to want to pursue that claim and to have rejected the settlement offer for that reason.
23 Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].
InterGroup failed to comply with the Court’s directions
[54] Pipe Vision submits that InterGroup did not comply with Lang J’s timetabling directions of 1 February 2024. Pipe Vision says that InterGroup’s delay in filing its reply evidence and submissions caused significant pressure on Pipe Vision by, for example, raising new legal issues in submissions which required urgent research and consideration.
[55] InterGroup says that the truncated timeline directed on 1 February was the cause of Pipe Vision and that it did its best to comply with the condensed timeframe. Further, InterGroup submits that although sworn affidavits were not filed and served until 7 February, there was no prejudice to Pipe Vision because unsworn copies of the affidavits were provided on 6 February and were not sworn only because it was a public holiday.
[56] I agree with InterGroup that no uplift is justified on account of its non-compliance. As well, both parties failed to comply with Court timetabling directions. In the circumstances it would be unjust to require InterGroup to pay increased costs for that reason.
InterGroup raised (and then abandoned at the hearing) new legal issues on the eve of the hearing
[57] In its submissions on jurisdiction filed at 11.31 am on 7 February 2024, counsel for InterGroup raised arguments that:
(a)Pipe Vision had submitted to the High Court’s jurisdiction; and/or
(b)Pipe Vision was estopped from protesting jurisdiction.
[58] At the hearing, as recorded at [30] of the judgment, InterGroup abandoned those arguments, presumably recognising they lacked merit. Pipe Vision submits an uplift of 50 per cent is appropriate pursuant to r 14.6(3)(b)(ii). InterGroup submits no uplift is justified.
[59] While I agree that these arguments lacked merit, addressing them was straightforward. The abandoned points only formed a small part of written submissions. In my view, no uplift is appropriate.
Summary
[60]I reject Pipe Vision’s various claims for increased costs.
Conclusion
[61]Pipe Vision is entitled to costs calculated on a 2B basis. No uplift is justified.
[62]I award costs of $13,742.50 in favour of Pipe Vision.
Anderson J
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