Medtech Limited v Valentia Technologies (NZ) Limited

[2024] NZHC 3315

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-003051

[2024] NZHC 3315

BETWEEN

MEDTECH LIMITED

Plaintiff

AND

VALENTIA TECHNOLOGIES (NZ) LIMITED

Defendant

On the papers
Counsel:	A J Lloyd, J J K Spring and O Sutton for Plaintiff K T Glover and D T D Horton for Defendant
Judgment:	8 November 2024

JUDGMENT OF ANDERSON J

[Costs]

This judgment was delivered by me on 8 November 2024 at 3 pm pursuant to Rule 11.5 of the High Court Rules 2016.

………………………………

Registrar/Deputy Registrar

Solicitors:Minter Ellison Rudd Watts, Auckland Create IP, Auckland

MEDTECH LTD v VALENTIA TECHNOLOGIES (NZ) LTD [2024] NZHC 3315 [8 November 2024]

[1]        In this judgment I address the issue of costs relating to the following applications:

(a)Medtech’s application for “interim-interim” relief dated 1 February 2024, which was heard on 7 February 2024, and determined in my judgment of 16 February 2024;1

(b)Valentia’s application dated 26 January 2024, seeking discharge of Medtech’s preservation order granted on 21 December 2023, which was heard on 29 and 30 May 2024, and determined in my judgment of 20 June 2024;2 and

(c)Medtech’s application for an interim injunction, which was heard on 29 and 30 May 2024 and determined in my judgment of 31 July 2024.3

[2]        Costs on an opposed interlocutory application must be fixed in accordance with the High Court Rules 2016 when the application is determined, unless there are special reasons to the contrary.4

[3]        Valentia seeks costs of $145,965.50 and disbursements of $108,500.90 for the above interlocutory applications. It says it is the successful party and is entitled to costs under r 14.2(1)(a) based on a “Category 3” costs categorisation,5 elevated in some instances.

[4]        Medtech contests the costs categorisation, the assertion that Valentia should be regarded as the successful party for all purposes, the claims for a number of steps in the proceeding and the level of disbursements sought.

1      Medtech Ltd v Valentia Technologies (NZ) Ltd [2024] NZHC 191.

2      Medtech Ltd v Valentia Technologies (NZ) Ltd [2024] NZHC 1618.

3      Medtech Ltd v Valentia Technologies (NZ) Ltd [2024] NZHC 2107.

4      High Court Rules 2016, r 14.8.

5      Rule 14.3(1).

Costs categorisation

[5]        I first address the costs categorisation. Category 3 applies to “[p]roceedings that because of their complexity or significance require counsel to have special skill and experience in the High Court”.6 I accept Valentia’s submission that this is such a case.

[6]        Valentia notes the parties jointly submitted in a memorandum of 19 June 2024 that “the factual and legal issues are complex” in seeking an assigned Judge. My own perception, as I expressed in the judgment of 31 July 2024, is that this case involves “a complex and technical area both factually and legally”.7 Additionally, the matter has considerable significance to the parties.

[7]I now consider each of the applications.

Medtech’s application for “interim-interim” relief

[8]        Medtech  made  an  informal  application  for  “interim-interim”  relief  on    1 February 2024. I dismissed that application in a judgment delivered on 16 February 2024. The application was made by memorandum without formal application or opposition.

[9]        As to who was the successful party, Medtech emphasises that Valentia gave undertakings which ultimately were critical in terms of whether the relief would be granted, and it would not otherwise have done so without the application.   I agree.   I direct that costs lie where they fall on this application.

Interim injunction application

[10]      Medtech says that both parties can be regarded as the successful party in respect to certain matters on the interim injunction application with the effect that costs ordered should be reduced by 50 per cent. This submission is based on Valentia’s focus in submissions on whether there was a serious question to be tried on the pleaded

6      Rule 14.3(1).

7      Medtech Ltd v Valentia Technologies (NZ) Ltd, above n 3, at [9].

causes of action, arguments on which it was ultimately unsuccessful. The primary grounds for refusing interim relief were balance of convenience factors.

[11]      The submission does not survive a nuanced analysis: Valentia was partly successful even on the issue of whether there is a “seriously arguable case” in that     I found there was no tenable claim that Valentia was using the SEHR Hook to extract and misappropriate Medtech’s confidential information.8 Moreover, while not successful on the “seriously arguable case” issue for the other causes of action, the analysis of those claims was needed to tease out whether there was a good arguable case for the specific relief sought by way of interim injunction. I decline to reduce costs in favour of Valentia founded on the attention given to the causes of action.

Discharge of without notice preservation order

[12]      Both Valentia and Medtech contend that they are the successful party in the discharge application. Valentia succeeded in that the preservation order was discharged. However, Medtech says that the order was replaced with a discovery order on the same terms as those contained within a proposal it put to Valentia on 18 April 2024.

[13]      I consider Valentia to be the successful party. Although it did accept discovery orders, it had already provided an undertaking in substance in the same terms. Moreover, by the time of the hearing it had become plain that the assumptions on which I made the preservation orders without notice in December 2023 were undermined because of Valentia’s explanations as to how its systems work; and also the way that it modifies its software.

[14]      It is correct, as Medtech submits, that Valentia resisted that a discovery order was a pragmatic way of dealing with the application for rescission. However, that does not lead me to the view that Medtech is successful. Medtech’s costs submissions to that effect presuppose that the Court would not have discharged the orders in the absence of Valentia (reluctantly at the end of the hearing) acceding to the Court’s proposal of discovery orders as an add on, despite having already given undertakings;

8 At [82].

and that Valentia was being unreasonable in refusing to accede to discovery orders prior to the hearing. Neither of those assumptions are sound.

[15]      I have considered whether Valentia’s focus in the rescission application on establishing wrongful non-disclosure in Medtech’s “without notice” application should result in any costs adjustment. The arguments of non-disclosure failed. But I conclude that there is not a sufficiently strong justification for picking out element/s Valentia ran that were unsuccessful and awarding part-costs to Medtech. I take into account Valentia’s degree of success in refusing certain elevated costs it seeks, below.

[16]I accept that Valentia is the successful party and is entitled to costs in its favour.

Cost steps/disbursements

[17]      As to the quantum of costs claimed, Valentia submits, and I accept, that it is difficult to distinguish between the costs relating to the rescission and interim injunction applications as they were heard and case-managed together. The submissions and evidence overlapped. As I have concluded Valentia is entitled to costs on both, for the purposes of considering the quantum of costs, I address them together.

Time allocations

[18]      Valentia has added various time allocations to what would be usual for interlocutory applications on a 3C basis. The allowance in band C including evidence for filing or opposing an application is two days (hence four days altogether for the rescission application and interim injunction opposition). Valentia seeks one day for each opposition/application and an additional 16 days in total for the evidence. It also seeks 14 days for hearing and preparation which well exceeds the allowance.

[19]      The resulting total of 32 days9 sought for only two interlocutory applications for just a two-day hearing needs to be placed in perspective: scale costs for all steps for a full 10-day substantive hearing adds to not much more, at 38.5 days (all band B).10 At band C it is 51.5 days. I do not consider the 32 days sought is appropriate

9      Excluding case management (memoranda and duty judge attendance).

10     Excluding case management steps.

seen in that context. There will also be a degree to which costs on the applications are in effect used for the substantive proceeding because of an overlap on briefing and preparation of legal arguments on the causes of action.

[20]      As foreshadowed earlier, Medtech’s argument that costs were expended on arguments advanced by Valentia that were unsuccessful provides further reason to reject Valentia’s application for elevated costs on the basis of the significant industry involved. This mitigates Medtech effectively paying further costs on those aspects.

[21]      Accordingly, on both applications, I order costs on a 3C basis. I certify for two counsel for both applications. I set out the costs in Schedule 1 attached.

Case management

[22]      Valentia seeks costs for the various memoranda filed to date related to the interlocutory applications and for telephone conferences required. In some of the memoranda, Valentia was seeking an indulgence on timetable orders. Others are related to scheduling of the hearing, evidence issues and timetabling.

[23]      Medtech submits that the costs of memoranda should be reserved to be determined at the conclusion of the hearing. I consider Valentia is entitled to costs for memoranda related to the applications other than where it was seeking an indulgence. Those memoranda were required by the applications. I also allow time for the conferences scheduled to discuss a hearing date. I set out the memoranda and appearances I have allowed for (and in what band) in Schedule 2 and included the total in Schedule 1.

Disbursements

[24]      Valentia seeks its expert witness expenses amounting to some $107,750. This equates to 215.5 hours at $500 per hour, being the charge-out rate for each of the two experts. They made a joint affidavit.

[25]      I agree that it was necessary and appropriate for expert evidence to be briefed for the interim injunction proceeding. As Valentia submits, this is demonstrated by

Medtech’s criticism at the time of the “interim-interim” hearing that there was no independent evidence before the Court corroborating Mr Javad’s evidence (Valentia’s principal). In my judgment on the interim injunction application, I raised issues with Valentia’s experts putting in joint affidavits, but I do not consider that undermines the need for evidence, or that expert costs should be recoverable.

[26]      However, as Medtech says, there is inevitably a degree of overlap in the costs charged for the interlocutory application and for the substantive proceeding. At the very least, the initial stage of getting up to speed would be incurred in any event, but that is only part of the overlap.

[27]      For that reason, awarding the full cost of the expert witnesses as disbursements to Valentia is not justified as reasonably necessary for the interlocutory applications. Valentia raises that r 14.12(2) states that the Court “must” include disbursements in a costs award subject to the other aspects of that rule. Medtech responds that r 14.12(2) is specifically by its terms for “costs awarded for a proceeding” and that the word “proceeding” is defined in r 1.3(1) not to include an interlocutory application.

[28]      Rule 1.3 provides definitions “unless the context otherwise requires”. Given that r 14.8 stipulates for costs on interlocutory applications to be fixed generally when the application is determined, the reference to “proceeding” in r 14.12(2) must mean (as the context requires) the disbursements relating to the interlocutory application in the proceeding, when costs on this are being fixed. Otherwise, no disbursements related to an interlocutory application (such as filing fees) would be included in costs determined on interlocutory applications, which cannot be correct.11

[29]      Under the former High Court Rules, witness expenses were not usually included in a costs award on an interlocutory application.12 However, that is not the approach taken under the High Court Rules 2016 and in any event, flexibility is required.13 That is because it would be unfair to treat all the expert witness expense as recoverable as a disbursement for these interlocutory applications when there is an

11     Staples v Freeman [2020] NZHC 1124 at [40].

12     Simunovich Fisheries Ltd v Television NZ Ltd (No 8) (2008) 18 PRNZ 826 (HC) at [29]–[30].

13     See Staples v Freeman, above n [11].

overlap with the substantive proceeding. No recovery would also be unfair because the expert evidence was necessary for the applications and there has been irrecoverable expense on the applications on which Valentia has been successful.

[30]      A mechanism which enables me to get to a fair result is r 14.12(2)(b)–(c). This requires a disbursement to be “specific to” and “reasonably necessary for” the conduct of the proceeding. In the context of ordering costs on an interlocutory application, this means specific to and reasonably necessary for the conduct of that application.

[31]      The bare invoices provided by Valentia give no narration that would allow me to assess with accuracy the proportion of time reasonably necessary for the interlocutory applications (as distinct from the substantive proceeding). Nor would that be a straightforward task even if I had more detailed invoices. My best assessment in view of my knowledge of the proceeding and the steps involved is that 50 per cent of the costs can be regarded as specific to and reasonably necessary for the interlocutory applications. For the avoidance of doubt, the remaining 50 per cent will be disbursements Valentia can seek to claim if it prevails in the substantive proceeding. Therefore, expert costs of $53,875 are allowed.

[32]      The other disbursements claimed by Valentia for filing and a bundle are unobjectionable. I set out the total disbursements payable in Schedule 3.

Costs on the costs application

[33]I order costs on the costs application by Valentia at 0.6 time on a 3B basis.14

Result

[34]      Medtech is to pay costs to Valentia on the rescission and the interim injunction applications as set out in the attached Schedule 1. Medtech is to pay Valentia’s disbursements as set out in the attached Schedule 3. This is $61,422 in costs and

$54,625.90 in disbursements, with a total of $116,048.

14     See Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR14.17(13)].

[35]Costs on the “interim interim” application are to lie where they fall.

Anderson J

SCHEDULE 1

Item	Date	Description	Band	Time (days)
Application and opposition
22	26 Jan 2024	Interlocutory application by Valentia for discharge (including evidence)	C	2.0
23	9 Apr 2024	Opposition to Medtech’s application for interim injunction (including evidence)	C	2.0
Subtotal	4.0
Hearing and preparation
24	21 May 2024	Written submissions — Valentia’s application	C	3.0
24	27 May 2024	Written submissions — opposition to Medtech’s application	C	3.0
26	29–30 May 2024	Hearing	C	2.0
27	29–30 May 2024	Second counsel at hearing	C	1.0
Subtotal	9.0
Case management
Subtotal	3.8
Costs on the costs application
Subtotal	Costs sought on submissions	B	0.6
Total Days	17.4
TOTAL	Category 3	17.4 × $3,530 per day	$61,422

SCHEDULE 2

Case management15
11		2 Apr 202416	Memorandum	B	0.4	Memorandum re timetabling and hearing issues.
11		30 Apr 2024	Memorandum	B	0.4	Memorandum updating Court on whether 16 May fixture is required.
11		30 Apr 2024	Further memorandum	B	0.4	Proposal for timetable for submissions for 16 May hearing.
11		10 May 2024	Joint memorandum	B	0.2	Timetable re evidence in reply and submissions.
11		17 May 2024	Memorandum	B	0.4	Memorandum re Medtech reply evidence.
11		22 May 2024	Memorandum	A	0.2	Memorandum seeking clarification of Judge’s minute.
11		22 May 2024	Further memorandum	A	0.2	Memorandum re substantive content of evidence.
11		23 May 2024	Memorandum	A	0.2	Memorandum re substantive content of evidence.
11		27 May 2024	Memorandum	A	0.2	Memorandum updating Court as to expert evidence
13		18 April 2024	Telephone case management conference	B	0.3	Teleconference to confirm hearing date of 14–15 May 2024.
13		18 May 2024	Telephone case management conference	B	0.3	Second teleconference — parties confirmed 14–15 May cannot work as a hearing date.
13		2 May 2024	Telephone case management conference	B	0.3	Further teleconference to discuss two-day hearing of the matter.
13		20 May 2024	Telephone case management conference	B	0.3	Teleconference re Medtech’s reply evidence.
Total	3.8

15     I have assessed prior memoranda and concluded they were either broader based or too “interim interim” specific.

16     There were two memoranda filed by Valentia that day — the other was for the first case management conference so is irrelevant.

SCHEDULE 3

Disbursements

Date	Description	Amount $ (excl GST)
Expert witness costs — Campbell McKenzie and Wayne Bryant
8 Mar 2024	Invoice IRS302222 (50 hours)	25,000.00
29 Mar 2024	Invoice IRS302225 (50 hours)	25,000.00
13 Apr 2024	Invoice IRS302301 (83.3 hours)	41,650.00
31 May 2024	Invoice IRS302409 (32.2 hours)	16,100.00
Subtotal	107,750.00
50 per cent	$53,875.00
Other
26 Jan 2024	Court filing fee — interlocutory application	434.78
9 Apr 2024	Court filing fee — opposition	95.65
26 May 2024	Common bundle volume 4, couriers	220.47
Subtotal	$750.90
TOTAL	$54,625.90