National Mini Storage Limited v National Storage Limited

[2017] NZHC 2295

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-2211 [2017] NZHC 2295

BETWEEN

NATIONAL MINI STORAGE LIMITED

Plaintiff

AND

NATIONAL STORAGE LIMITED First Defendant

NATIONAL STORAGE HOLDINGS LIMITED

Second Defendant

NATIONAL STORAGE (NZ) PTY LIMITED

Third Defendant

NATIONAL STORAGE (OPERATIONS) PTY LIMITED

Fourth Defendant

Hearing:	On the papers
Counsel:	A Brown QC, J Oliver-Hood and AIK Allen-Franks for the Plaintiff J Miles QC, J Baigent and J C Dickson for the Defendants
Judgment:	22 September 2017

COSTS JUDGMENT OF MUIR J

This judgment was delivered by me on Friday 22 September 2017 at 3.00 pm

Pursuant to Rule 11.5 of the High court Rules.

Registrar/Deputy Registrar

Date:…………………………

NATIONAL MINI STORAGE LTD v NATIONAL STORAGE LTD [2017] NZHC 2295 [22 September 2017]

Introduction

[1]      In my judgment dated 31 July 2017 I invited memoranda in the event the parties  were  unable  to  agree  costs  between  them.    I  did  so  noting  that  the proceedings did not appear to have been prior categorised and with a provisional indication that a 3B categorisation may be appropriate.

[2]      I have now received extensive memoranda, with the parties seemingly in dispute on numerous issues and down to a level of minutiae including whether witnesses should be entitled to business or economy class air fares.

Categorisation

[3]      In attempting to dissuade me from my provisional view the plaintiff points me to the joint memorandum of the parties dated 23 September 2016 in which they stated that the proceeding was properly characterised as “an ordinary defended proceeding” on  a “2B  basis”.   This  memorandum  was  filed  in  response to  the plaintiff’s interim injunction application (itself supported by affidavits) which, in the event, was resolved by way of defendants’ undertakings  and a joint request for priority fixture.   The provision of affidavits meant, however, that at the point the memorandum was filed the defendants were better placed to assess the full extent of the plaintiff’s argument than is typically the case at that stage.

[4]      I  had  not  directed  myself  to  the  contents  of  this  memorandum  when  I expressed my provisional views.  I note that it was signed by senior counsel.  It is relevant for the reasons set out by Asher J in Intercity Group (NZ) Ltd v Nakedbus NZ Ltd:1

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….    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.

[5]      Nevertheless because no formal categorisation has yet occurred by the Court this is not a case where special reasons are required before a new categorisation can be adopted.

[6]      The plaintiff also relies on Intercity Group as supporting the proposition that the proceedings were not sufficiently complex or of sufficient significance to warrant my provisional categorisation.

[7]      That was a case noted as having unusual and difficult features relating to the application  of  trademark  law  and  other  intellectual  property  principles  to  the purchase, display and use of Google advertisements.  However, his Honour held that the  application  of  established  legal  principles  to  new  areas  of  technology  and practise commonly arises in litigation and that, in itself, would not mean the proceedings were of a “type of complexity or significance that is envisaged for

category 3 proceedings”.2   He said:

[8]       …  These  proceedings  were  not  complex  in  the  way  that,  for instance, large scale taxation cases or technical Commerce Act proceedings 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.

[8]      The defendants attempt to distinguish this decision on the basis the plaintiff’s expert  evidence  on  organic  traffic  was,  in  that  case,  unchallenged  whereas  the present case involved analysis by three independent experts of both organic and Adwords analytics data, the interpretation and relevance of which was vigorously challenged.   They also say that even if they did, at the outset, give an indication about the appropriate categorisation, they could not have envisaged at that time the complexity of the case which ultimately developed.  In particular they say:

(a)       Mr Sareczky did not exhibit the Google organic analytics data to his initial affidavit, so that it could not be fully assessed.

(b)There was no evidence from Mr Brandon at that stage so his analysis and opinions (which it is said required comprehensive rebuttal) were unknown to the defendants.

(c)      It was not at that stage known how the plaintiff would interpret the

defendants’ own analytics data.

(d)      The plaintiff changed the focus of the case during trial.

[9]      The defendants also point to the fact that my provisional indication was adopted by the plaintiff as justifying a two day fixture before the Court of Appeal.

[10]     Ultimately I am persuaded that my provisional view was incorrect and that the proceedings are appropriately classified for the purposes of r 14.3 of the High Court Rules 2016 as category 2.   Although there were some elements of factual complexity possibly exceeding those in Intercity, there is sufficient similarity in the cases to justify categorisation on a like basis.  I am also significantly influenced by counsel’s initial agreement as to categorisation.  With well-funded litigants and the respective parties led by acknowledged experts in the area, it cannot at any stage have been imagined that the dispute would not be rigorously fought and with the most comprehensive evidence possible.  Moreover, to the extent that any particular steps took longer than a normal time to complete this can be accommodated by way

of band allocation for such step.3  Again this was the approach adopted by Asher J in

Intercity.

Band Allocation

[11]     In their initial submission the defendants sought a Band C allocation for each step.   As the Court of Appeal pointed out in Commissioner of Inland Revenue v Chesterfields Preschools Ltd (No 2):4

… this is especially the case where a party is arguing for a blanket Band C categorisation, … if a party wants other than Band B, that party must demonstrate why a normal time for that particular step would be insufficient.

3      Rule 14.5(2).

4      Commissioner of Inland Revenue v Chesterfields Preschools Ltd (No 2) [2010] NZCA 400, (2010) 24 NZTC 24,500, at [161].

[12]     I therefore address each of the steps for which band allocation is necessary.

Memoranda

[13]     In its memorandum dated 21 August 2017 the plaintiff sought a Band C allocation for each of seven memoranda (many joint) filed during the interlocutory stages of the proceedings.  In its response the plaintiff pointed out that none of the memoranda concerned matters of particular complexity.  In their reply the defendants confined themselves to a claim for a C categorisation in respect of one memorandum only, that of 23 September 2016.   That memorandum involved the exchange of multiple iterations and several calls between counsel.   I allowed 2C costs in that respect.  In respect of the balance of the memoranda I allow 2B costs.

Mentions hearing before Brewer J on 8 September 2016

[14]     The defendants now agree to Band B categorisation for this step.

Sealing

[15]     As  the  defendants  point  out,  the  time  allocation  for  sealing  an  order  or judgment is 0.2 days regardless of band allocated.

Statement of defence

[16]     I do not accept the defendants’ argument that a more than usual amount of time was necessary to prepare this eight page document.  I accept that because of the plaintiff’s interim injunction application they were able to prepare their defence with fuller knowledge of the plaintiff’s case than is usual at that point in proceedings and the fact that the defence was filed 12 days only after a joint memorandum in which the defendants had agreed that a 2B categorisation is instructive.

Discovery

[17]     The plaintiff says that, in advance of discovery, it wrote to the defendants indicating that documents relating to the establishment, administration and search engine optimisation of the defendants’ website, including but not limited to the Google analytics data for the website since it commenced in New Zealand, would be

relevant to the trial.  It complains that despite this request relevant documents were provided in three tranches on 25 and 29 November and 2 December 2016.   The defendants say that this initial advice did not enable them to identify with precision what was required and in later correspondence the plaintiff became more specific about the particular reports it needed and which were provided (but many of which were  not  referred  to  by  the  witnesses).    I  accept  that  discovery  in  this  case necessitated a “comparatively large amount of time”, for the purposes of r 14.5(2)(c). The plaintiff sought voluminous discovery.  This was reflected in an agreed bundle comprising 13 volumes.  Band C is in my view appropriate.

Inspection

[18]     The plaintiff acknowledges that its discovery was excessive as a result of the inclusion of audio files which it had not intended to give the defendants access to. The defendants say that, as a result, they were left to “wade through”, for approximately 25 hours, irrelevant material.  In my view category C is appropriate with an uplift of 33 per cent.

Common bundle

[19]     I accept the defendants’ submission that an excessive number of documents were included in the common bundle.  Several volumes were not opened or referred to during the trial.  I accept that a comparatively large amount of time would have been spent in reviewing its contents, including checking that documents requested by the defendants were included and legible.  Category C is appropriate.

Preparation for hearing

[20]     Both parties agree that category C is appropriate for this step.   I note that Asher J came to a similar conclusion in Intercity.  This categorisation also reflects the plaintiffs inadvertent serving of the incorrect version of its reply which resulted in the defendants needing to address matters they previously understood had been accepted by the plaintiff.

Preparation of briefs of evidence

[21]     Again Band C is appropriate.  The briefs of evidence were extensive and in parts technical.  I am satisfied that a comparatively large amount of time was spent in their preparation. The plaintiff does not argue otherwise.

Other matters - Costs

Amended statement of claim

[22]     In its opening submissions the plaintiff sought to adjust the focus of its proceedings to (arguably) allege that it had goodwill and reputation in the name National Storage in addition to National Mini Storage.  It then sought to amend its statement of claim.   That application was opposed and resulted in the defendants preparing comprehensive written submissions.  As the argument developed, counsel for the plaintiff concluded that no amendment was required and the application was withdrawn.  The defendants seek an award of costs by reference to Band C.   The plaintiff says that costs should lie where they fall.   In my view a costs award in favour  of  the  defendants  is  appropriate  given  that  the  application  was  only withdrawn after the preparation of submissions and argument.   However, I do not consider anything other than a normal amount of time was necessary to respond to the application.  I fix costs on a 2B basis.

Hearing time

[23]     The defendants argue that the trial took longer than it should have because of the unnecessarily extensive (170 pages plus schedules) closing submissions filed by the plaintiff.   It says that until these were filed the parties were on track for the proceedings to be heard within the original eight days allocated, but that a substantial amount of time was spent reviewing and analysing the submissions preparing written reply submissions and preparing for the extra half day which the Court allocated for the reply.

[24]     I accept that the plaintiff’s written submissions were unnecessarily long but as a result of my requirement that its oral submissions be completed within the time

allocated  I  do  not  accept  that  trial  duration  was  significantly  extended  on  this account.  No uplift is in my view appropriate.

Castelli evidence

[25]     As initially filed, Ms Castelli’s brief was replete with opinion evidence but she did not qualify herself as an expert.   An inevitable challenge followed.   In response the defendants filed an amended brief qualifying her appropriately and deleting significant portions of the evidence.  The plaintiff maintained its objection relying primarily on an absence of impartiality on Ms Castelli’s part. The matter was considered in the course of a pretrial conference held on 1 March 2017 at which I indicated to counsel that I considered any assessment of her impartiality better made at the conclusion of cross-examination.   I also indicated that: (1) insofar as she expressed the opinion that the respective brandings of the companies were “vastly different” and in “striking contrast” I regarded that as unhelpful, and (2) certain observations in paras 116 and 164 of her brief were, in my view, beyond the proper ambit of her evidence.

[26]     As a result of those observations the defendants indicated that certain further adjustments  would  be  made  to  the  brief  and  the  plaintiff  agreed  that  a  final assessment of its admissibility should await trial.

[27]   I agree with the plaintiff that, against this background, costs should appropriately lie where they fall on this aspect.  Large parts of Ms Castelli’s brief were prima facie inadmissible.  The subsequent challenge was resolved with broadly equivalent success on both sides.

[28]     I take into account also that Ms Castelli confirmed in evidence that she had not read the Code of Conduct of Expert Witnesses before preparing her initial brief, in breach of r 9.43 of the High Court Rules.

Reduction in hearing time for unavailability of witness

[29]     I accept that a deduction of one half day is necessary from the defendants’ calculations as a result of the unavailability of its witnesses on the afternoon of Friday 24 March 2017. This resulted in early adjournment that day.

Chronology

[30]    The plaintiff says a further half day reduction is warranted because the defendants failed to comply with the rule concerning the content of the chronology.5

They filed their own chronology without identifying which facts were disputed as a result of which the Court was required to deal with two chronologies in breach of r 9.9.    Although  the  position  was  unsatisfactory  I  do  not  consider  a  half  day deduction reasonable and any smaller deduction within the context of the current costs award is de minimis.   Nor do  I accept  that the time required for closing submissions was made materially longer by the defendants’ part abandonment of its honest concurrent use defence.   They clearly signalled such abandonment in their own closing submissions.

Disbursements

Those accepted

[31]     The plaintiff accepts the following disbursements:

Filing fee statement of defence  $ 95.65

Filing fee notice of opposition  $ 95.65

Filing fee sealing judgment  $ 43.48

Supplementary case bundle  $803.40

5      See High Court Rules 2016, r 14.7(f)(i).

Mr Shand

[32]     The plaintiff disputes the expert witness fees of the defendants’ principal witness Mr Duncan Shand.  His total costs were $69,443.75.  The plaintiff says that this is not a reasonable amount based on the limited information it has received and points out that his fees are double the amount charged by the plaintiff ’s experts Messrs  Brandon  and  Sareczky  (combined  $32,089).     It  refers  to  Asher  J’s

observation in Intercity that:6

… in assessing reasonable fees a loose equivalence between the experts’

costs on both sides can be a useful touchstone.

[33]     The defendants say that using the plaintiff ’s fees as such a touchstone is inappropriate given that:

(a)      Mr Shand is managing director of a specialist digital agency with over

50 employees and that his expertise covered a much broader area than

either of the plaintiff ’s expert witnesses;

(b)he  had  to  respond  to  the  arguments  and  analysis  raised  by  two different experts as well as preparing his own evidence and was required to attend Court while the plaintiff ’s experts gave evidence in order to ensure that his evidence was as relevant and helpful as possible;

(c)      his evidence was broadly accepted by me whereas I expressed some

concerns about aspects of the plaintiff’s experts evidence; and

(d)      in fact his time exceeded a fees cap by which he was bound.

[34]     In relation to Mr Shand’s evidence I observed at para [237] of my decision:7

Unlike Messrs Sareczky and Brandon, his background is in marketing generally, with a more recent specialisation in Internet-based marketing.   I accept,  therefore,  that  he has  a  broader  range  of  relevant  experience  in relation  to  branding,  marketing and  effects  on  consumer  behaviour than

6 At [36].

7      National Mini Storage Ltd v National Storage Ltd [2017] NZHC 1775.

either of the plaintiff’s experts.  I accept also the defendants’ submission that he provided his evidence in a generally detached, impartial and helpful manner.

[35]     I accept that he was a high quality and thoroughly prepared expert in a case which had significance for both parties.

[36]     That said, however, there is such a disproportion in the fees charged by Mr Shand and those cumulatively billed by Messrs Brandon and Sareczky as to raise concerns in terms of the reasonableness of the former.   I note that Mr Shand’s company has billed for 116.5 hours of his time at $375 per hour and 92.2 hours of assistant’s  technicians  time  at  $225  per  hour.    However,  these  totals  do  not apparently capture attendances relating to the initial review of the plaintiff ’s experts’ affidavits, peer review of Mr Sareczky’s supporting documents or initial meetings. These are were separately billed under what is styled a “First retainer payment – November” in the amount of $5,000.00.   Cumulatively that represents a very substantial amount of time in the context of a case such as this.  Moreover, although all but the first account refer to total hours spent, the narrations are economical as for example “Document Reviews – Affidavits/Confidential Documents – 24 hours”.

[37]    Although it involves an element of “robust judgment”8 I consider some deduction is necessary from the total time invoiced by Mr Shand to bring the account within the reasonable bounds I must recognise.

[38]     I allow a 30 per cent reduction with the result that the amount I award is

$48,611.

Defendants’ air fares, accommodation and miscellaneous allowances

[39]     The  defendants  claim  as  a  disbursement  business  class  air  fares  for  the witnesses Mr Catsoulis and Ms Castelli together with business class air fares, accommodation  and  miscellaneous  allowances  for  Mr  Rogers  who  was  the

defendants’ general counsel and who attended throughout the trial.

8      Of the sort recognised by the Court of Appeal in Black v ASB Bank Ltd [2012] NZCA 384 at [81]

as often necessary in relation to costs applications.

[40]     The plaintiff says that in the context of an Australian defendant business class air fares are not appropriate and that because Mr Rogers was not a witness his attendance was not “reasonably necessary for the conduct of the proceeding”.

[41]     I accept that Mr Rogers’ attendance was reasonably necessary.  Ms Castelli was not authorised to give instructions to counsel and because of other commitments Mr  Catsoulis’ evidence  was  required  to  be  interposed,  after  which  he  left  the jurisdiction.   It was reasonably necessary for the conduct of the proceeding that counsel have present in New Zealand a person authorised to give instructions during the trial.  Mr Rogers fulfilled that requirement.

[42]     I do  not,  however,  agree that  business  class  air  fares  are an  appropriate disbursement in the context of trans-Tasman travel.  In Marinovic v Marinovic the Court allowed  such  air  fares  where witnesses  were  required  to  travel  30  hours through four airports.9     In the present case all that was involved was travel from Brisbane.  I allow economy class air fares for each of Mr Rogers, Mr Catsoulis and Ms Castelli.  I calculate those at the rate charged for defendants’ witness Ms Adido (NZ$1,281.17).

[43]     In  the  result,  I  make  the  following  deductions  from  the  disbursements claimed in relation to each of the following persons airfares:

Catsoulis  $2,244.84

Castelli  $1,644.83

Rogers  $   915.83

$4,805.50

[44]     Therefore I allow travel, accommodation, food and miscellaneous expenses

of $11,154.91.10

9      Marinovic v Marinovic HC Auckland CIV-2006-404-2447, 1 June 2007.

10     Being $15,960.41 as claimed by the plaintiff less $4,805.50.

Result

[45]     I award, in favour of the defendants, costs and disbursements in the amount of $168,513.09 in accordance with the schedule annexed hereto.

Muir J

Schedule

Costs on Category 2 Basis

Item	Step	Band	Time	Total
2	Commencement of Defence	B	2	4,460
11	Filing memoranda 09/09/2016 23/09/2016 10/10/2016 02/12/2016 09/02/2017 09/03/2017 10/04/2017	B C B B B B B	0.4 1 0.4 0.4 0.4 0.4 0.4	892 2,230 892 892 892 892 892
12	Appearance at mentions	B	0.2	446
20	List of documents in discovery	C	7	15,610
21	Inspection of documents	C	6 (+33% uplift)	17,840
29	Sealing judgment	B	0.2	446
23 24	Interlocutory application re Ms Castelli’s evidence	(costs to lie where they fall)
24	Interlocutory application to amend (submissions)	B	1.5	3,345
30	Defendants preparation of briefs	C	5	11,150
32	Defendants’ preparation of lists of indexes, authorities, common bundle	C	4	8,920
33	Preparation for hearing	C	5	11,150
34	Appearance at hearing Principal counsel	8	17,840
35	Second counsel	4	8,920
Total				107,709

Disbursements

Experts costs  48,611.00

Filing fee        Statement of defence	95.65
Notice of opposition	95.65
Sealing judgment	43.48
Supplementary case bundle	803.40
Travel and accommodation	11,154.91
Total	60,804.09

Overall Total  $168,513.09