Oxygen Air Limited v LG Electronics Australia Pty Limited
[2018] NZHC 3350
•17 December 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-2184
[2018] NZHC 3350
BETWEEN OXYGEN AIR LIMITED
Plaintiff
AND
LG ELECTRONICS AUSTRALIA PTY LIMITED
Defendant
Hearing: On the papers Counsel:
M Black for the Plaintiff
A Holmes on behalf of A Steel for subpoenaed witness
Judgment:
17 December 2018
JUDGMENT OF GORDON J
[As to costs]
This judgment was delivered by me
on 17 December 2018 at 3.00 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Craig, Griffin & Lord, Auckland Counsel: M Black, Auckland
A Steel, Auckland
A Holmes, Auckland
OXYGEN AIR LTD v LG ELECTRONICS AUSTRALIA PTY LTD [2018] NZHC 3350 [17 December 2018]
Introduction
[1] This is an application for costs which follows from my decision setting aside a subpoena duces tecum served on a witness, Geoffrey Lim, on behalf of the plaintiff,
Oxygen Air Limited (Oxygen).1
[2] Mr Lim and Oxygen were unable to agree on costs and each has filed a separate memorandum.
[3] Mr Lim applies for costs and disbursements as set out in Annexure A to this judgment. As is apparent from the Annexure, Mr Lim also seeks increased costs.
[4] Oxygen agrees that some of the items are appropriately claimed. It opposes others along with the claim for increased costs.
Background
[5] Oxygen formerly distributed and installed LG Electronics Australia Pty Ltd (LG) air-conditioning and heat pump systems in New Zealand.
[6] Oxygen brought proceedings against LG claiming that LG breached its supply and distribution agreement with Oxygen in a number of ways, one of which was that it supplied products to other distributors in breach of the exclusivity clause in the agreement. Oxygen also alleges a breach of a further agreement with LG by which it says LG granted Oxygen distribution rights to LG solar panel products. Finally, Oxygen alleges that LG engaged in misleading and deceptive conduct in breach of the Fair Trading Act 1986.
[7] Mr Lim is a director of I Fix 4U Services Limited which was formerly known as I Fix 4U Limited. Mr Lim’s position is that I Fix 4U was, and remains, a general service agent for LG.
1 Oxygen Air Ltd v LG Electronics Australia Pty Ltd [2018] NZHC 2912.
[8] Oxygen’s claims against LG were for hearing on 29 October 2018. On 8 October 2018, Oxygen served a subpoena duces tecum on Mr Lim. Both LG and Mr Lim separately applied to set aside that subpoena.2
[9] The applications were opposed by Oxygen. It also sought a direction under r 9.10 of the High Court Rules that each of the three witnesses gives oral evidence at the trial.
[10] The applications were called on 29 October 2018, which was to have been the first day of the trial. On that day, the trial was adjourned. The applications therefore proceeded on a pre-trial basis later in the week, on 1 November 2018.
[11] I granted the application on behalf of Mr Lim to set aside his witness subpoena. I also granted the application by LG, to the extent it related to Mr Lim’s witness subpoena.3 I refused the application by Oxygen for a direction that Mr Lim give oral evidence at trial.
Principles
[12] Costs are at the discretion of this Court.4 The High Court Rules (the Rules) provide guidance as to how the discretion might be exercised.5
[13] The general principle is that the party who fails with respect to a proceeding should pay costs to the successful party.6 But the overriding consideration when exercising the discretion to award costs is that any award ought to do justice between the parties.7
2 LG also applied to set aside other subpoenas which Oxygen had served on two other witnesses.
3 I did not grant the application by LG to set aside the subpoenas for the other two witnesses. My preliminary view on costs expressed in my judgment was that as between Oxygen and LG, costs should lie where they fall.
4 High Court Rules, r 14.1(1).
5 Rules 14.2-14.7.
6 Rule 14.2(1)(a).
7 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [5].
Individual costs items
[14] I will work through each of the items in Annexure A that is opposed. I will then address the claim for increased costs.
Item 26 (29 October 2018)
[15]Mr Lim claims 0.25 days for the hearing.
[16] Mr Black, for Oxygen, first submits that it was made clear by counsel for Oxygen to Mr Lim’s legal representatives before the trial commencement date that as the trial was set down for two weeks and three days, there was no need for Mr Lim or his counsel to attend at the beginning of the trial. Mr Black says that it was hoped that matters in relation to Mr Lim’s attendance, including what further documentation may be needed, might be resolved during that period. Accordingly, an appearance on 29 October 2018 on behalf of Mr Lim was not necessary.
[17] Mr Black submits that in any event, the appearance at best was only for a mention on that day. Accordingly, item 12 (0.2 days) should apply.
[18] Regardless of what may have been discussed between counsel, as the trial Judge I would have expected an appearance by counsel for Mr Lim on the first day. The applications to set aside the subpoena were both filed on 25 October 2018 after the last pre-trial conference which was held on 11 October 2018. Accordingly, the next court date was 29 October 2018, the first day of the trial. As counsel for Mr Lim had made an application in the trial, he was required to appear.
[19] However, I accept Mr Black’s submission that this was a mention and the proper claim is 0.2 days under item 12.
Item 26 (1 November 2018)
[20]Mr Lim claims 0.5 days for the hearing.
[21]Mr Black submits that the actual time involved for Mr Lim’s application was
0.25 days. He says that must be assessed in the context that LG’s application in
relation to all three subpoenas and the first part of his submissions in opposition were completed by the lunch adjournment.
[22] However, that overlooks the fact that Mr Holmes, on behalf of Mr Lim, had a right of reply which he exercised and which occurred after the lunch adjournment. I therefore allow the claim.
Item 11 – preparing and filing the costs memorandum
[23] Mr Lim claims 0.4 days for preparing his costs memorandum. In support of the claim, Mr Holmes submits that Oxygen refused, without reasonable justification, to accept Mr Lim’s offer for Oxygen to pay costs on a Category 2 Band B basis. Mr Holmes relies on a letter dated 16 November 2018 to Mr Black’s instructing solicitors. The letter sought a response in writing as to whether costs and disbursements could be agreed in the total sum of $3,510.50 no later than 4 pm on Monday 19 November 2018. That total sum was made up as follows:
Number Step Time Amount 22 Filing interlocutory application and preparing affidavit in support 0.6 $1338.00 26 Hearing on 29 October 2018 0.25 $557.50 26 Hearing on 1 November 2018 0.5 $1115.00 Date Disbursements Amount 25 October
2018
Ministry of Justice – filing fee for interlocutory application $500.00
[24] The letter concluded that if agreement was not reached, the letter would be placed before the Court in support of Mr Lim’s application for costs and it advised that costs in relation to the preparation of the memorandum would be sought.
[25] Although agreement was not reached, Mr Black did reply by email on 19 November 2018 at 10.38 am. The email recorded that counsel would obtain instructions and reply by 5 pm the following day. Mr Black recorded his view that only 0.25 days should be allowed for 1 November 2018. He also questioned the costs of 0.25 days for 29 October 2018 on the basis that counsel for Oxygen had advised there was no need to attend on behalf of Mr Lim on that day, nor did any application
require Oxygen’s formal response by that day. Mr Black also noted the provision for a “mention” costs allowance, which was less than the 0.25 days claimed. The email concluded that counsel could discuss the matters raised and any other relevant matters by telephone before the following day if that would assist.
[26]There was no record of any further communications.
[27] I am not inclined to award this item claimed. First, I have upheld Oxygen’s (fall back) position that the claim should be for a mention hearing on 29 October 2018, and accordingly I have ordered a lesser amount than that which was claimed and referred to in the letter.
[28] Second, although Mr Black did not agree with what was proposed on behalf of Mr Lim, there was a response which contained constructive questioning of the proposal.
Increased costs
[29] Mr Lim seeks increased costs under r 14.6(3)(b)(ii). Mr Holmes submits that the subpoena was plainly an unnecessary step as the Court found: Oxygen already had the information it sought to obtain from Mr Lim by way of discovery from LG; Oxygen failed to make reasonable attempts to procure a brief of evidence from Mr Lim prior to serving the subpoena; and the Court was satisfied that it was not necessary for Mr Lim to give evidence at all.
[30] Mr Holmes refers to my finding that it was an abuse of process for Oxygen to have issued the subpoena to Mr Lim.8 Mr Holmes submits that such conduct may justify an award of indemnity costs under r 14.6(4)(b). While that submission is made, Mr Lim only seeks an uplift from scale, not indemnity costs.
[31] Mr Holmes notes that Mr Lim was not a party to the proceeding and acted reasonably in relation to the subpoena that was issued to him, which again Mr Holmes submits would justify an award of indemnity costs under r 14.6(4)(b). Within four
8 Oxygen Air Ltd v LG Electronics Australia Pty Ltd, above n 1, at [29].
working days of being served with the subpoena, Mr Lim’s solicitors had written to Oxygen’s solicitors setting out Mr Lim’s position. Oxygen did not respond on an open basis, and Mr Lim was forced to make the application so that it could be heard at the commencement of the trial.
[32] Mr Holmes refers to the fact that Oxygen only changed its position in respect of the documents it sought from Mr Lim during the course of the hearing, withdrawing one request and modifying the other. However, Oxygen continued to oppose the application on the basis that Mr Lim should be required to create documents (or obtain them), which in Mr Holmes’ submission was a position that never had any prospect of success.
[33] In opposition, Mr Black submits that none of the criteria specific under r 14.6 applies. Mr Black says, for example, this is not an overt or obvious case where Oxygen has failed to unjustifiably, and without reasonable justification, comply with Court orders or directions. Nor has Oxygen acted vexatiously, frivolously or improperly.
[34] I observe in relation to the examples given above, that while Mr Holmes submitted that indemnity costs might be justified, Mr Lim is not in fact seeking indemnity costs. He is seeking increased costs under r 14.6(3)(b)(ii). The submission made by Mr Black does not apply to this rule.
[35] Finally, Mr Black submits that although the Court found that the subpoena should be set aside, that was fundamentally the very issue involved with the application. Mr Black says the outcome should therefore not of itself justify the imposition of increased costs.
Discussion
[36]The part of r 14.6 upon which Oxygen relies reads as follows:
(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 –
…
(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or
…
[37] Taking or pursuing an entire claim that lacks merit can warrant increased costs.9 However, as was said by Kós J in N-Tech Ltd v Abooth Ltd:10
[92] In my Minute of 28 September 2011 I counselled parties against getting their hopes up for any increased or indemnity costs award in this case. I noted that the Court of Appeal had made it clear that an uplift from scale is justifiable where particular conduct unreasonably increases costs above what might ordinarily have been expected. But I noted that inherent demerit does not of itself cast the proceedings into HCR 14.6(3) (increased costs) consideration. On the other hand, inherent demerit combined with flagrant misconduct might justify some measure of indemnification under HCR 14.6(4)(a).
(Citations omitted)
[38] In this case, Mr Black submits that at the time the subpoena was issued, further information had come to the attention of Oxygen and its advisors, including further documents discovered by LG outside the discovery orders previously made. It was considered appropriate and necessary that Mr Lim be subpoenaed to attend.
[39] However, that submission overlooks my finding that there were inadequate efforts to brief Mr Lim before the subpoena was issued.
[40] In my judgment, I referred to the attempt by counsel for Oxygen to contact Mr Lim by telephone in or about the week of 8 October 2018.11 The judgment continued:
[44] … According to Mr Rotteveel [from Oxygen], the message left for Mr Lim was simply that Mr Black wanted to talk to Mr Lim about I Fix 4U selling LG’s air-conditioning products. There is no evidence that Mr Black mentioned court proceedings, let alone Mr Lim providing a statement and giving evidence in those proceedings. There are no exceptional circumstances.
9 N-Tech Ltd v Abooth Ltd [2012] NZHC 1167. See also the cases discussed in that judgment from [92] to [107].
10 N-Tech Ltd v Abooth Ltd, above n 9.
11 Oxygen Air Ltd v LG Electronics Australia Pty Ltd, above n 1, at [44].
[41] Accordingly, I was not satisfied that all reasonable attempts were made to procure a brief from Mr Lim before Oxygen moved to have the subpoena issued.12
[42] In relation to the subpoena itself, there were two categories of documents sought. The subpoena was issued in the following terms:
2.You are ordered to bring with you and produce at the same time and place any records and any information held relating to the period from January 2010 to 14 August 2015 of the following:
2.1LG’s invoices and summaries of the same to I Fix 4U Limited for the purchase of LG air-conditioning units from LG NZ Limited.
2.2All LG warranty and installation records, including parts purchased from LG for air-conditioning units.
[43] During the course of the hearing, Oxygen changed its position in relation to the two categories of documents. The Court was advised that Oxygen no longer required Mr Lim to produce any documents falling under the description in 2.2 of the subpoena. In relation to 2.1, Oxygen’s position was that it should be amended to read:
Summaries of LG’s invoices to I Fix 4U Limited for the purchase of LG air- conditioning units from LG NZ Limited.
[44]In other words, Oxygen no longer sought copies of the actual invoices.
[45] I held that the subpoena as it related to the production of documents was an abuse of process and should be set aside as it went behind discovery orders and the position adopted by Oxygen in relation to third party discovery.13 Second, it would require Mr Lim to create (or at least obtain) a document which he does not have, covering five and a half years of transactions.14
[46] A further reason in support was that such a summary already existed and was in the hands of Oxygen through the process of discovery.15 I was provided with a copy of a spreadsheet summarising the transactions in the course of the hearing.
12 At [44].
13 At [29](a).
14 At [29](b).
15 At [30].
[47] In relation to the spreadsheet, Mr Black submits that had that been provided in an affidavit before the hearing, then Oxygen could have responded questioning the veracity of that document. Mr Black submits that the defended hearing was brought on at short notice without the full benefit of all the parties addressing in more detail relevant factual issues.
[48] That submission does not assist Mr Black’s case. The availability of the spreadsheet was only one of three reasons supporting my decision that the subpoena was an abuse of process.
[49] I bear in mind the statement by Kós J referred to in [37] above that inherent demerit does not itself cast the proceedings into r 14.6(3) (increased costs) consideration. However, I accept Mr Holmes’ submission that Mr Lim acted reasonably in relation to the subpoena. I refer to Mr Holmes’ submission that within four working days of being served with the subpoena, Mr Lim’s solicitors had written to Oxygen’s solicitors setting out his position. There was no response from Oxygen on an open basis and Mr Lim was therefore placed in a position where he was required to make the application so that it would be at least on the Court record at the commencement of the trial.
[50] I consider that those factors do provide the basis for increased costs, but I consider the 33 per cent uplift sought is too high. In my view, an uplift of 20 per cent is sufficient.
Conclusion
[51] I therefore award costs on a category 2, band B basis in the sum of $4,014.00 and disbursements in the sum of $550.00, totalling $4,564.00, as set out in Annexure B to this judgment, against Oxygen in favour of Mr Lim.
[52]I make an order accordingly.
Gordon J
Annexure A
Costs and disbursements claimed
Number
Step
Time
Amount
22
Filing interlocutory application and preparing affidavit in support
0.6
$1,338.00
26
Hearing on 29 October 2018
0.25
$557.50
26
Hearing on 1 November 2018
0.5
$1,115.00
11
Preparing and filing this costs memorandum
0.4
$892.00
29
Sealing costs order
0.2
$446.00
2B Total
$4,348.50
Plus 33 per cent uplift under r 14.6
$1,435.00
Total
$5,783.50
Date
Disbursements
Amount
25 October
2018
Ministry of Justice – filing fee for interlocutory application
$500.00
Ministry of Justice – sealing order fee (to be incurred)
$50.00
Total
$550.00
Annexure B
Costs and disbursements awarded
Number
Step
Time
Amount
22
Filing interlocutory application and preparing affidavit in support
0.6
$1,338.00
12
Mention on 29 October 2018
0.2
$446.00
26
Hearing on 1 November 2018
0.5
$1,115.00
29
Sealing costs order
0.2
$446.00
2B Total
$3,345.00
Plus 20 per cent uplift under r 14.6 (reduced from 33 per cent claimed)
$669.00
$4,014.00
Date
Disbursements
Amount
25 October
2018
Ministry of Justice – filing fee for interlocutory application
$500.00
Ministry of Justice – sealing order fee (to be incurred)
$50.00
$550.00
Total
$4,564.00
0
2
0