Oraka Technologies Limited v Geostel Vision Limited
[2021] NZHC 2635
•5 October 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2005-419-000809
[2021] NZHC 2635
BETWEEN ORAKA TECHNOLOGIES LIMITED
First Plaintiff
ORAKA GRADERS LIMITED
Second PlaintiffMICHAEL WILLIAM SCHWARZ
Third PlaintiffAND
GEOSTEL VISION LIMITED
First Defendant
PAUL DAYNES and the ESTATE OF GORDON ROBERTSON
Second DefendantsNAPIER TOOL & DIE LIMITED
Third Defendant
Hearing: On the papers Judgment:
5 October 2021
JUDGMENT OF HINTON J
(Costs)
This judgment was delivered by me on Tuesday, 5 October 2021 at 12 pm
pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
Shanahans Law Ltd, Auckland. Malloy Goodwin Harford, Auckland. BP Henry, Auckland.
AR Kenwright, Auckland.
KT Glover, Auckland.
ORAKA TECHNOLOGIES LTD v GEOSTEL VISION LTD [2021] NZHC 2635 [5 October 2021]
[1] On 23 April 2018, I entered judgment against all defendants – Geostel Vision Ltd (Geostel), Paul Daynes and Gordon Robertson, and Napier Tool & Die Ltd (Napier) – and in favour of the first plaintiff, Oraka Technologies Ltd (Oraka), for
$510,000 plus interest.1 On 25 June 2020, the Court of Appeal quashed that order and
substituted damages in the sum of $47,000 plus interest, a total in excess of $92,000.
It remitted the issue of costs for the 2017 High Court hearing back to this Court.2
[2] All issues of costs between Oraka and Napier have been resolved by agreement. The first and second defendants (jointly referred to as Geostel for convenience) however raise a number of issues as to costs. Attempts to resolve the issue of costs with Geostel on a without prejudice basis have been unsuccessful.
Background
[3] The full background to this dispute has been outlined in previous decisions.3 In brief, Mr Michael Schwarz, the third plaintiff, invented an asparagus grading machine with a unique cup assembly (the Oraka grader). He formally assigned the copyright in the cup assembly to Oraka, a company of which he and his wife were the sole shareholders and directors. The second defendants, Mr Paul Daynes and Mr Gordon Robertson, established their own company, Geostel. Geostel began manufacturing and selling a grading machine with a cup assembly identical to the Oraka grader’s cup assembly, which was manufactured and sold to it by Napier.
[4] The plaintiffs filed proceedings against the defendants for breach of copyright in 2005. A series of decisions and appeals followed in this Court and the Court of Appeal.4 Relevantly, in 2013, the Court of Appeal entered judgment for liability against all defendants in favour of Oraka.5 In 2016, this Court entered judgment against the defendants in the sum of $4.1 million.6 Napier successfully appealed that judgment the same year.7 The Court of Appeal consequently remitted the case back to this Court to determine the quantum of damages on the basis of a notional licence fee
1 Oraka Technologies Ltd v Geostel Vision Ltd [2018] NZHC 769.
2 Geostel Vision Ltd v Paul Daynes and the Estate of Gordon Robertson [2020] NZCA 256.
3 At [6]-[20].
4 At [20].
5 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111.
6 Oraka Technologies Ltd v Geostel Vision Ltd [2016] NZHC 1188.
7 Napier Tool & Die Ltd v Oraka Technologies Ltd [2016] NZCA 554.
payable to Oraka (the second damages hearing). As noted above, I awarded Oraka
$510,000 in damages.
[5] In a costs judgment following my decision, I found that Oraka was entitled to costs on a 2B basis for attendances in relation to the 2017 High Court hearing, the exact amount to be calculated by the parties.8 In relation to the 2016 High Court hearing, I fixed costs and disbursements at $72,661.99 in favour of Napier, following the Court of Appeal’s decision in favour of the defendants.9
[6] As noted, Geostel appealed my substantive decision awarding Oraka $510,000 in damages. The appeal was allowed and the Court of Appeal substituted the $510,000 award for an award of $47,000. The Court set aside the costs award in Oraka’s favour in relation to the 2017 High Court hearing and remitted the issue of costs for that hearing to this Court for re-assessment.10
The successful party
[7] Part 14 of the High Court Rules 2016 (the Rules) governs parties’ entitlement to costs. Rule 14.2 fundamentally states:
14.2 Principles applying to determination of costs
(1) The following general principles apply to the determination of costs:
(a)the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds:
...
[8] Geostel submits it should be awarded costs and disbursements as the successful party in the second quantum hearing (and in the quantum phase of the proceedings overall). It says the amount ultimately awarded to the plaintiffs was within the range of outcomes suggested by the defendants and its expert witnesses. Geostel submits that awarding the plaintiffs costs would encourage inefficiency as it would encourage
8 Oraka Technologies Ltd v Geostel Vision Ltd [2019] NZHC 1325 at [12].
9 At [17]-[18] citing Napier Tool & Die Ltd v Oraka Technologies Ltd [2016] NZCA 554 at [81].
10 Geostel Vision Ltd v Paul Daynes and the Estate of Gordon Robertson [2020] NZCA 256 at [158].
plaintiffs in split proceedings to plead damages as high as possible in the knowledge that they would still be awarded costs if they had established some liability.
[9] Geostel further submits that the fact the Court of Appeal did not direct that costs should lie where they fall, rather that the issue of costs be remitted back to the High Court, suggests that the Court of Appeal supports awarding costs to the defendants.11
[10] Oraka submits that it was the successful party in the litigation. It acknowledges that its success was limited but submits that this should be reflected by limiting the costs payable by Geostel to a half share of 40 per cent of what would ordinarily have been payable (reflecting also the settlement with Napier).
[11] I agree that Oraka remains the successful party in the proceeding, albeit in a limited way, as it received damages for the breaches it alleged. I come back to how the limited success should be factored in.
[12] Geostel was successful on appeal and was awarded costs to recognise that in the Court of Appeal. I do not share Geostel’s view that the Court of Appeal indicated that costs should be awarded to the defendants. The Court of Appeal gave no indication of its view on costs other than the existing award of full 2B costs and disbursements should not stand.
[13] As I find that Oraka remains the successful party, I do not need to consider Geostel’s arguments concerning an uplift in costs. However these submissions remain relevant to Geostel’s other points.
The Calderbank offers
[14] A Calderbank offer is an offer to settle without prejudice as to costs. The effect on costs of a Calderbank offer is at the Court’s discretion as set out in rr 14.10 and
14.11 of the Rules. Rule 14.11 reads as follows:
11 Geostel Vision Ltd v Paul Daynes and the Estate of Gordon Robertson [2020] NZCA 256 at [158].
14.11 Effect on costs
(1) The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.
(2) Subclauses (3) and (4)—
(a)are subject to subclause (1); and
(b)do not limit rule 14.6 or 14.7; and
(c)apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).
(3) Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A—
(a)offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or
(b)makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.
(4) The offer may be taken into account, if party A makes an offer that—
(a)does not fall within paragraph (a) or (b) of subclause (3); and
(b)is close to the value or benefit of the judgment obtained by party B.
[15] While the effect of a Calderbank offer is at the Court’s discretion, an offer must be considered where it is more favourable than the ultimate recovery.12
[16] The first offer relied upon by Geostel was made by Napier in 2015. Napier offered $500,000 to settle the entire proceeding. Counsel now representing all defendants says the offer was made for the benefit of all defendants. However while I agree that was the effect, it was not expressly made on their behalf. My understanding is in fact that Geostel was taking no part in the proceeding at that time. I am inclined to agree with Oraka that on a plain reading of r 14.11(3) a party is entitled to costs after an offer is made only if that party makes the offer. Even though the 2015 offer was also to Geostel’s benefit, I do not think these rules were intended to benefit parties other than those who made the offers relied upon. However I do not need to reach any final view on that point because I do not consider it unreasonable for Oraka to have rejected that offer at the time it was made. At that time Oraka had succeeded
12 Warren Metals Ltd v Grant [2015] NZHC 2462, at [42].
in the Court of Appeal as to liability and it was claiming a much larger sum. While it ultimately obtained much less, it obtained two judgments in excess of $500,000. I therefore do not consider that this offer should lead to any entitlement to costs on the part of Geostel.
[17] Two offers were made to settle on 30 June 2017 by Geostel and Napier. As part of its offer, Napier would pay in effect about $170,000 and Geostel promised it would not enforce a judgment debt Oraka owed to Kamber Electronics Ltd (Kamber) which had been assigned to Geostel. Geostel claims the two offers were worth
$326,000 in total.
[18] Again I do not consider that r 14.11 applies. Geostel did not offer “a sum of money” in terms of the rule but a set-off of a debt over which it had taken an assignment unrelated to the copyright claims. I do not consider it was clear in 2017 that the set-off would have been of greater benefit to Oraka than a judgment. Also, for the reasons already set out above, it was not unreasonable for Oraka to reject the offer. In the case of this offer also it was made very late. Oraka had only two days to consider it (with a possible extension) and it was only one week before the hearing.
[19] Again I do not consider this offer should lead to any entitlement to costs as such on the part of Geostel.
Efficiency
[20] Geostel submits that Oraka failed to put relevant evidence before the Court contrary to the clear guidance in relevant authorities. It submits that the second damages hearing could have been considerably shorter and more efficient if Oraka had provided that relevant evidence. It submits that Oraka also “re-ran” its arguments from the first damages hearing rather than pursuing litigation efficiently meaning that the evidence of some of its witnesses was disregarded by this Court and Court of Appeal. I found both parties were inefficient and added to the time taken. In light of the Court of Appeal decision I would have to take these factors into account specifically on the part of Oraka.
Additional issues
[21] In its submissions, Geostel states it has paid its share of the damages awarded by the Court of Appeal by way of legal set off. As stated, Geostel had been assigned part of a judgment debt owed to Kamber by Oraka. The amount assigned to Geostel was approximately equivalent to the amount it owes Oraka by virtue of the Court of Appeal judgment.
[22] Oraka submits that whether rights of set off exist have no relevance to the issue of costs. I agree. If the parties cannot agree it will need to be determined separately.
[23] Geostel submits that the costs awarded to the plaintiffs should have been capped at the amounts recoverable in the District Court.13 Geostel recognises that it would be difficult to revisit earlier costs decisions given the lapse of time but wishes to record this as a concession that is relevant to a Court’s discretion on costs in the quantum phase of the proceeding.
Conclusion
[24]I find that Oraka was the successful party in the proceeding.
[25] However, weighing up all the relevant factors, including Oraka’s negligible success, the fact they contributed unnecessarily to the time of the proceeding by offering redundant evidence and submissions, and the two offers in 2015 and 2017, I consider that costs should lie where they fall. I therefore make no order as to costs.
Preservation order
[26] Geostel also requests the Court to set aside a preservation order made in relation to Geostel’s moulds by the Court at the outset of proceedings in 2005. Geostel submits that the copyright work which a preservation order was based upon has now expired.
13 High Court Rules, r 14.13.
[27] Oraka says the order should not be set aside as Geostel’s moulds were made in breach of Oraka’s copyright. Therefore, Oraka submits expiration of the copyright does not change the fact that the moulds were made in breach of copyright and says that Oraka remains entitled to ownership of the moulds.
[28] Geostel responds by submitting that no permanent orders were made in relation to the moulds. It says the preservation orders were just interim orders to prevent the moulds from being sent overseas. It says that Oraka did not seek permanent preservation orders over the moulds. Therefore, with the proceeding coming to an end and no permanent order sought, the interim preservation order should be discharged.
[29] The Court of Appeal referred back to me only the question of costs on the 2017 hearing for reconsideration. I do not consider it appropriate that I address the question of the preservation order. It seems neither party addressed that point at the conclusion of the liability hearing many years ago or up until filing of the present submissions. If Geostel wants the order set aside it should apply formally to that effect and if Oraka considers a permanent order should be made it should obviously also apply, or cross- apply as appropriate. Any such application can then be dealt with in the Duty Judge list.
Hinton J
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