Precast NZ Limited v Any Step Limited
[2017] NZHC 2450
•6 October 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2014-404-3171 [2017] NZHC 2450
BETWEEN PRECAST NZ LIMITED
Plaintiff
AND
ANY STEP LIMITED First Defendant
PETER JOSEPH EVANS Second Defendant
AND
PAUL TREVOR CANE Third Party
Hearing: On the papers Counsel:
MJ Fisher and KG Ng for plaintiff and third party
B Gustafson and TP Refoy-Butler for defendantsJudgment:
6 October 2017
JUDGMENT OF FITZGERALD J [As to costs]
This judgment was delivered by me on 6 October 2017 at 4 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Claymore Partners Ltd, Auckland (B Langdon) Morrison Mallett, Wellington (M Morrison)
Precast NZ Limited v Any Step Limited [2017] NZHC 2450 [6 October 2017]
[1] On 21 June 2017, I delivered judgment in the substantive proceedings.1 The dispute centred on an exclusive licence agreement of a mould to make concrete precast stairs (“Agreement”). Under the Agreement, Any Step granted Precast NZ exclusivity in New Zealand in relation to the use and sale of the mould. In return, Precast NZ agreed to support Any Step in its overseas marketing efforts in respect of the mould. Precast NZ’s obligation in this regard is pursuant to what the parties refer to as the “support clause”.
[2] Each party made claims against the other in respect of the Agreement. Each party’s pleading was amended a number of times, and claims were further refined or abandoned during the hearing itself. In broad and high-level terms, the remaining claims by the time of the hearing were as follows:
(a) Precast NZ claimed that:
(i)Any Step had supplied a mould to a third party in Australia with actual knowledge (or with wilful blindness) that the mould was to be on-supplied to a New Zealand-based precaster (McIntosh), or in circumstances where it ought to have known that fact. Precast said this supply was either a breach of an express term in the Agreement, or a breach of an implied term, and sought injunctive relief preventing Any Step from engaging in any similar supply, together with damages;
(ii)Any Step was in breach of the Agreement by failing to supply Precast NZ with rubber extrusion strips2 as requested by Precast NZ, for which it sought specific performance or a mandatory injunction of supply; and
(iii)Any Step had breached the Agreement by purporting to terminate it on or about 26 January 2016, for which it sought
1 Precast NZ Ltd v Anystep Ltd [2017] NZHC 1371.
2 A part required in order to operate the mould.
an injunction restraining Any Step from taking steps on the grounds of the purported termination.3
(b) Any Step counterclaimed, (broadly) saying that:
(i)Precast NZ had breached the support clause in the Agreement (or alternatively a “duty of good faith”) in two respects,4 for which it sought, inter alia, damages, together with a declaration that the breach entitled Any Step to terminate the Agreement, and an account of profits for the unauthorised use of the mould after the alleged valid termination of the Agreement;
(ii)Precast NZ breached a non-assignment clause in the Agreement and/or a duty under the Agreement not to sub- licence, by selling moulds to two (New Zealand-based) third parties on terms which granted the third parties exclusive use of the mould in the area in which each operated, for which Any Step also sought damages, a declaration that the breaches entitled Any Step to terminate the Agreement and an account of profits on the same basis as (i) above;
(iii)Precast NZ’s director (Mr Cane) breached his fiduciary duties when he was a director of Any Step. This claim (against Mr Cane personally) arose out of the same facts that gave rise to the allegations that Precast NZ breached the support clause. In respect of this claim, Any Step sought damages and
exemplary damages (of $10,000).
3 It is to be noted, however, that this claim was not advanced at the time Precast NZ commenced its proceedings in December 2014, given the purported termination did not occur until January
2016. Shortly after the purported termination, Precast NZ sought and obtained interim injunctive relief preventing Any Step from taking steps on the purported termination pending resolution of the substantive proceedings.
4 Failing to hand over a list of potential contacts in the UK and Europe, referred to by the parties
as the “Reids List”, and a failure to hand over details of a potential sales lead in South Africa.
[3] In relation to Precast NZ’s claim set out at 2(a)(i) above, Precast NZ purported to reserve the right to claim damages at a later point, in the event a third party brought proceedings against Precast NZ seeking damages as a result of the supply of the mould to McIntosh.
[4] In addition, and pursuant to an order made by me on 17 February 2017, Any Step’s claim for an account of profits was not pursued at trial, as it had been advanced very late in the proceedings and ordering discovery in relation to it would have required the trial to be adjourned. Further, Any Step confirmed during the hearing that it no longer pursued any claims for damages against Precast NZ, and that its counterclaim that it had validly terminated the Agreement relied only on one
of the two alleged breaches of the support clause,5 as well as the alleged breach of
the non-assignment clause and/or the alleged duty not to sub-license.
[5] I do not agree with Precast NZ’s submission that Any Step’s counterclaim that it had validly terminated the Agreement was essentially a “defence” to Precast NZ’s claim that the purported termination on 29 January 2016 was a breach of the Agreement.6 Any Step’s counterclaim had, from an early stage, pleaded that certain breaches of the Agreement by Precast NZ entitled Any Step to terminate the Agreement. By the time of Any Step’s amended statement of defence and
counterclaim dated 14 October 2015, Any Step pleaded that it was entitled to terminate the Agreement on the basis of both the alleged breach by Precast NZ of the support clause, and of the non-assignment clause and/or the pleaded duty not to sub- licence. Precast NZ’s claim did not include any alleged breach by Any Step in purporting to terminate the Agreement until its amended statement of claim dated
December 2016.7 In this way, Any Step’s counterclaim as to its right to terminate the
Agreement was not a counterclaim to or otherwise in response to a pre-existing claim to the opposite effect by Precast NZ.
5 The alleged failure to provide details in relation to a potential South African contact; the alleged breach in relation to the Reids List having been remedied before the purported termination.
6 See [6.3] of Precast NZ’s costs submissions dated 12 July 2017.
7 Though, as noted at fn 3 above, shortly after 29 January 2016, Precast NZ did seek interim injunctive relief preventing Any Step from relying on the purported termination.
[6] For the same reasons, I do not agree with Mr Fisher’s submission (for Precast NZ) that the core of the contest, at least from Precast NZ’s perspective, was whether or not the Agreement was “dead or alive”. The core of Precast NZ’s claim was, until quite late in the piece, its claim in respect of the McIntosh sale.
[7] I heard the matter over eight days. I was required to determine a broad range of factual and legal issues. Ultimately, I found each party had failed to make out its primary claim, although I made a declaration (in Precast NZ’s favour) that the agreement obliges Any Step to supply Precast NZ with rubber extrusion strips on request. Further, my finding that Precast NZ had not breached the support clause and was not in breach of the Agreement by sub-licensing the mould on an exclusive basis to third parties meant that Precast NZ was successful on that aspect of its claim set out at [2(a)(iii)] above. No specific relief was granted in this regard, however (rather Any Step’s counterclaim on that issue was dismissed).
[8] As I noted in my judgment, the proceedings had a long history and have been hard-fought. The hard-fighting continues. The parties have been unable to agree on costs, in respect of both the substantive proceedings and also a range of interlocutory hearings.
Costs on the substantive proceedings
[9] I first deal with the substantive proceedings. Both parties claim to be entitled to costs.
[10] Precast NZ acknowledges that it did “partially fail” in its claim against Any Step, as it failed to obtain injunctive relief on its claim in relation to the supply to McIntosh. I observe that this aspect of Precast NZ’s claim was its primary claim, and was the only claim brought by it when it originally commenced these
proceedings in 2014.8 Precast NZ says this failure must be put in the context of the
overall allegations and conclusions in the proceedings. As noted, Precast NZ frames
“the core of the contest” as being whether the Agreement was “dead or alive”. It
says it succeeded in part by obtaining a declaration (as to the rubber extrusion strips)
8 Though noting that, as noted at fn 3 above, Any Step had not purported to terminate the
Agreement at that time.
which was predicated on the continuation of the Agreement, as well as its claim that Any Step’s purported termination of the Agreement was invalid. It says that in contrast, Any Step wholly failed in seeking to establish that the Agreement had been validly cancelled, as well as in its claim against Mr Cane personally. Precast NZ therefore says costs should follow the event, and that on a 2B basis, it is entitled to
$80,881.00 costs and $48,957.96 disbursements.9
[11] Any Step’s starting point is that the parties had equal levels of success (or failure). But it says it should be awarded costs on the substantive proceeding because Precast NZ’s primary claim was in relation to the supply of a mould to McIntosh, which it submits was a misconceived “conspiracy theory” with no factual basis, occupying excessive preparation and trial time at undue cost to Any Step. Any Step says that this is was to such an extent that Precast NZ’s conduct would normally be grounds for increased costs under r 14.6 of the High Court Rules 2016. It also says its defeat of Precast NZ’s claim in this regard was a “very significant success and protection of Any Step’s contractual position”.
[12] For those reasons, Any Step says a 2B costs order should be made in its favour of $69,336, with disbursements to be fixed by the Registrar.
Law
[13] It trite to say that costs should ordinarily follow the event.10 The issue here is
‘what is the event’?
[14] Mr Gustafson for Any Step relies on the Court of Appeal’s decision in Packing In Ltd (in liq) v Chilcott in which the Court stated that when determining the event for the purpose of costs, the Court should take a broad and realistic appraisal of the end result:11
[5] In a case such as the present, where in broad terms each party has had similar success, we do not consider it helpful to focus too closely on the
9 Precast NZ submits that it has a “prima facie” entitlement to an award of increased costs, given timetabling breaches by Any Step, but in light of its failure to obtain injunctive relief on its claim in relation to the supply to McIntosh, a 2B scale costs award in its favour is appropriate.
10 High Court Rules 2016, r 14.2(a).
11 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA).
question which party has failed and which has succeeded. Costs in a case such as this should rather be based on the premise that approximately equal success and failure attended the efforts of both sides. To that starting point should be added issues such as how much time was spent on each transaction or group of transactions in issue, and any other matters which can reasonably be said to bear on the Court’s ultimate discretion on the subject of costs. In the end, as in all costs matters, the Court must endeavour to do justice to both sides, bearing in mind all material features of the case.
[6] … Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focusing on who initiated what step, and the extent to which that step succeeded or failed.
[Emphasis added]
[15] More recently, however, the Court of Appeal in Weaver v Auckland Council commented on its approach in Packing In. 12 The Court observed that while Packing In is “understandable in its own context”:13
…we do not consider that Packing In is authority for the proposition that in a damages claim it should be routine for the Judge dealing with costs to be required to unpick what happened in quite the detail undertaken in that case.
[16] Reinforcing that the “loser” ordinarily pays, the Court of Appeal in Weaver observed that although the appellants in that case had not succeeded to the full extent of their damages claim (but only roughly to half that extent), “success on more limited terms is still success”.14 The Court went on to observe that given the limited success in that case, the award of costs to the appellants was to be reduced by 50 per cent.
[17] These observations reflected and reinforced the Court of Appeal’s comments in Water Guard NZ Ltd v Midgen Enterprises Ltd, a decision issued shortly before Weaver v Auckland Council.15 In that case, the plaintiff had succeeded in only two of its five claims. The High Court considered that 75 per cent of trial time had been devoted to the plaintiff ’s unsuccessful claims, and so found the defendant to be the
successful party. Costs were awarded on that basis, also taking into account the
12 Weaver v Auckland Council [2017] NZCA 330.
13 At [24].
14 At [26].
15 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36.
plaintiff’s unreasonable conduct in declining settlement offers.16
[18] The Court of Appeal overturned the High Court’s costs orders. It emphasised that it was unprincipled to award costs to the losing side. It disagreed with the High Court that the plaintiff had lost the status of being the “successful” party because it failed on most of its claims which in turn occupied most of the trial. It observed that those matters can be properly recognised in other ways, such as reducing costs otherwise payable or ordering costs to lie where they fall. Overall, the Court considered that while the plaintiff was strictly successful, costs should nevertheless lie where they fall in light of the declined settlement offers and the trial-time allocations:
[18] When viewed in the round, allowing the burden of costs to lie where they fall in what was fruitless and uneconomic litigation accords with the overall justice of the case.
Discussion
[19] I do not agree with Any Step’s submission that at trial, the parties had equal levels of success (or failure), such that there is no one “successful” party for costs purposes.
[20] While Precast NZ was unsuccessful on its claim in relation to the sale of a mould to McIntosh, it was successful in its claims in respect of rubber extrusion strips and that Any Step’s purported termination of the Agreement in January 2016 was invalid. Accordingly, in light of the Court of Appeal’s observations in Weaver and Water Guard, it can be said that, at least in respect of “the proceeding” (for the purposes of r 14.2(a)) Precast NZ was overall the successful party. As the Court of Appeal observed in Weaver, success on more limited terms is still success. Any Step did not succeed in respect of any of its claims.
[21] Nevertheless, r 14.7(d) enables a court to refuse to award costs, or to reduce
costs which would otherwise be awarded to the “successful” party, on the basis that
16 Costs were awarded to the defendant (on a 2B basis) for 75 per cent of the trial where it was successful, but only for one counsel to take into account its failure on the three proven claims. Though the defendant was unsuccessful on the remaining 25 per cent, no costs were awarded in the plaintiff ’s favour for that portion because of the unreasonable conduct.
that party failed in respect of a cause of action or issue which significantly increased the costs of the party opposing costs. This step of adjusting costs as may be necessary to reflect partial success and partial failure was recognised and adopted by the Court of Appeal in Weaver17 and in Water Guard.18
[22] In this case, Precast NZ was wholly unsuccessful on its claim in respect of the sale of the mould to McIntosh. This was a significant aspect of its claim (if not the most significant), and it occupied a significant (but not in my view, overly significant) amount of the hearing. But although Precast NZ’s claim in respect of the sale of a mould to McIntosh was unsuccessful, it was not so lacking in merit that it would have warranted increased costs under r 14.6 (as suggested on behalf of Any
Step). The claim itself was not a “conspiracy theory”.19 As I noted in my
substantive judgment, the evidence on its face gave rise to some concern as to Any Step’s involvement in the sale to McIntosh (though taking all matters into account, I was not satisfied that Precast NZ’s claim in this regard was made out).20
[23] Precast NZ’s claim in respect of the rubber extrusion strips was a minor claim, and as I noted in my substantive judgment, scant attention was paid to this in either the parties’ written submissions or the evidence. I do not consider that in and of itself, it would have justified an award of costs.
[24] The third aspect of Precast NZ’s claim was its allegation that Any Step’s purported termination of the Agreement in January 2016 was a breach of the Agreement. As noted earlier, however, this particular breach was not advanced by Precast NZ until the amended statement of claim dated 9 December 2016, and Any Step’s counterclaims had already put in issue Any Step’s alleged right to cancel the
Agreement.21
17 Weaver v Auckland Council [2017] NZCA 330 at [26].
18 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36 at [13].
19 As opposed to aspects of Precast NZ’s submissions in respect of the contemporaneous paper trail.
20 See [97] of my substantive judgment.
21 Precast NZ had sought interim relief preventing Any Step from acting on the purported termination, and Thomas J granted that interim relief in a judgment dated 8 March 2016. In a judgment dated 17 May 2016, and in the absence of any submissions from Any Step on costs, Thomas J awarded costs to Precast NZ in respect of that injunction.
[25] Accordingly, as noted above, while I do not accept Mr Fisher’s categorisation that “the core of the contest” was whether the Agreement was “dead or alive”, that issue, together with the McIntosh issue, ultimately formed a substantial part of the contest between the parties at trial.
[26] I also take into account that Precast NZ advanced claims of breach that were not pursued, and it failed on a number of aspects of its pleaded claim in respect of implied terms of the Agreement. It also pursued an (unquantified) damages claim up until trial, and then sought (wrongly in my view) to reserve the right to pursue that damages claim at a later time. These various issues undoubtedly caused Any Step to incur not insignificant additional costs.
[27] Any Step’s submissions go to great lengths to unpick the steps Precast NZ took during the proceedings. Counsel has dissected matters such as the length of Precast NZ’s opening submissions, the witnesses Precast NZ called, the particular questions Precast NZ asked witnesses in cross-examination, and my credibility findings in respect of certain witnesses. I do not, however, consider that such detailed scrutiny is warranted given the broad and realistic approach mandated by the Court of Appeal in Water Guard and Weaver. Further, I do not consider that these particular steps amount to the type of “bad behaviour” which might otherwise warrant a reduction in costs otherwise awarded in any event.
[28] I also take into account that Any Step itself also pursued issues which it abandoned, and in particular, damages claims in respect of Precast NZ's alleged breach of the Agreement, as well as an account of profits which I ruled could not, for case management reasons, be dealt with at the substantive trial.
[29] Looking at the matter in a broad and realistic way, the two key issues at the hearing, occupying a broadly similar amount of time and attention, were the McIntosh issue and whether Any Step was entitled to terminate the Agreement.22
Precast NZ failed on its McIntosh claim. Any Step failed on its termination claim.
22 The McIntosh claim and that aspect of Any Step’s claim regarding the alleged breach of the support clause were intensely factual and most oral evidence was directed to those matters. Any Step’s claim in respect of Precast NZ’s alleged breach of the non-assignment clause and/or a duty not to sub-licence was largely a legal issue, focusing on the proper interpretation of the Agreement.
[30] As such, while strictly Precast NZ might be considered the “successful” party from a costs perspective, I also consider there are grounds to adjust the level of costs that would otherwise be awarded to it pursuant to r 14.7(d). Like in Weaver, the time and resources necessary for Any Step to meet Precast NZ’s unsuccessful arguments significantly increased its costs.
[31] I have considered whether a final result of costs lying where they fall is appropriate in all the circumstances. That was my initial view at the conclusion of my substantive judgment, given each party’s respective failure on its primary claim (or success in defeating the other’s primary claim). However, on reflection, this would not appropriately recognise that Precast NZ did obtain some (albeit minor) relief (in respect of the rubber extrusion strips), and was technically successful on that aspect of its claim which was a “response” to Any Step’s counterclaim as to termination. I consider that an appropriate outcome is that Precast NZ is awarded scale costs in respect of the proceeding (on a 2B basis), as set out in Table E to
Precast NZ’s submissions, reduced by a total of 80 per cent.23
[32] As to disbursements, these must be included in a costs award if they meet the criteria in r 14.12(b)-(d). Subject to my comments below as to the expert witness fee of Mr Lucas, Precast NZ is awarded those disbursements claimed in its Table “E” attached to its submissions dated 12 July 2017.
[33] A disbursement, however, may be disallowed or reduced if it is disproportionate in the circumstances of the proceeding.24 Precast NZ claims
$24,150.00 (excluding GST) in respect of Mr Lucas. Mr Fisher explains in his submissions that Mr Lucas was originally retained to give advice on Any Step’s amended claim for damages. As noted, all damages claims against Precast NZ were abandoned at the hearing. And the damages claim maintained by Any Step against Mr Cane personally did not succeed. The experts also gave (limited) evidence on the
parameters for the taking of an account of profits, if Any Step had been successful in
23 I note, however, that Precast NZ’s claim for its commencement of defence (on Any Step’s counterclaim) is based on a daily recovery rate of $2,230. The daily recovery rate in force when Precast NZ commenced its defence (17 March 2015) was $1,990. Precast NZ may only recover costs for this step at the 17 March 2015 daily recovery rate.
24 Rule 12.12(3).
its claims and an account was subsequently ordered. As noted, Any Step was not successful in those claims.
[34] On this basis, and given Mr Lucas’s fees related to issues on which Precast NZ succeeded (or alternatively, Any Step failed), as a matter of principle, Precast NZ ought to recover Mr Lucas’ costs in full. My hesitation is that the costs appear high, at least compared to the work required of the experts, to the extent visible to the Court and proportionate to the proceeding.
[35] The Court is to consider whether an expert’s fee is reasonable in amount.25
Given the narrow scope for the expert’s involvement in the proceeding and the limited evidence that the experts ultimately gave, I consider it is appropriate to reduce the amount claimed for Mr Lucas’s fee by 40 per cent.
[36] I should add that the fact I have reduced the quantum of this particular disbursement says nothing of the reasonableness of the actual fees charged by Mr Lucas to Precast NZ. That issue obviously turns on the scope and nature of instructions given to him, something that I cannot and do not need to consider in any event. Rather, the reduction simply reflects an assessment of the reasonableness of the amount claimed proportionate to the proceedings themselves.
[37] I now turn to consider the parties’ respective costs claims in relation to
various interlocutory applications.
Precast NZ’s interim injunction application
[38] In December 2014, Precast NZ filed an application for an interim injunction. This was essentially the first step taken in these proceedings. It was brought in response to Precast NZ learning of the supply of a mould to McIntosh, which it said put Any Step in breach of the Agreement. As noted above, at the substantive hearing, Precast NZ failed on this claim.
[39] During the course of a hearing before Thomas J on 28 May 2015 (who also heard an intervening application by Precast NZ, as counterclaim defendant, for
25 Rule 14.12(2)(d).
summary judgment on Any Step’s counterclaim), the parties agreed that the orders Precast NZ sought could, with amendment, be made by consent. Thomas J summarised the parties’ position, before reserving costs until the result of Precast NZ’s substantive claim was known:26
[63] Precast sought an injunction restraining Anystep from assisting anyone to purchase the System where Anystep knew “or ought reasonably to know” that the System would be used in New Zealand. The words in contention are those in the quotes. The matter was resolved by the order which incorporates reference to wilful blindness rather than the contentious wording. Wilful blindness is different from whether someone ought reasonably to know something. Precast's position, however, is that a proper construction of the Licence incorporates that obligation on the part of Anystep. The terms of the order were agreed simply for expedience as an interim measure and without prejudice to Precast's position at the substantive hearing.
[64] Because the issue relates to that which will be decided in the substantive hearing, the costs of the interim injunction application should be determined when the result of those proceedings is known.
…
[70] … Precast's costs in connection with the interim injunction application are reserved until the outcome of the substantive proceedings is known. …
[40] As can be seen from the above extract from Thomas J’s judgment, the key issue between the parties at the hearing of the injunction application was whether any orders should be made on the basis of circumstances where Any Step “ought reasonably to know” that a mould it was supplying was ultimately to be re-supplied into New Zealand. The order the parties’ ultimately consented to, however, only referred to “wilful blindness”. Precast NZ also failed at the substantive hearing on the “ought reasonably to know” aspect of its McIntosh claim.
[41] Although Thomas J explicitly reserved costs on the injunction application, Any Step (somewhat surprisingly) applied for costs in respect of it anyway. Thomas J dealt with that in a later (costs) judgment:27
[3] I dealt with the question of costs on the interim injunction in my judgment. Precast had sought costs on the basis that, although orders were
26 Precast NZ Ltd v Anystep Ltd [2015] NZHC 1535.
27 Precast NZ Ltd v Anystep Ltd [2015] NZHC 2244.
made by consent, the hearing was the first time the defendants offered the undertakings in the terms agreed. In my decision I said:
“[64] Because the issue relates to that which will be decided in the substantive hearing, the costs of the interim injunction application should be determined when the result of those proceedings is known.”
[4] The position was made clear in paragraph [70] which set out the result of the three applications where it was stated that Precast's costs in connection with the interim injunction application were reserved until the outcome of the substantive proceedings were known.
[5] Anystep now seeks costs plus a “significant uplift” on the basis that the hearing achieved nothing more than was offered in the undertakings from the first call of the matter.
[6] For exactly the same reason as I reserved costs until the outcome of the substantive proceedings is known in respect of Precast's application for costs, I do so in respect of Anystep's application.
Submissions
[42] Precast NZ claims costs on the injunction proceeding. Its current position is that prior to the hearing before Thomas J on 28 May 2015, Any Step has opposed the injunction application necessitating the inclusion of relevant documents in the bundle and the preparation of submissions. It says that costs should therefore follow the event, and seeks costs on a 2B basis in the sum of $2,587.
[43] Any Step also claims costs on the injunction proceeding. It advances two main reasons in support of this. First, it says Precast NZ should pay costs because it was completely unsuccessful in its substantive claim against Any Step on the interpretation matters that were in issue in the injunction application. Second, it says that it was unnecessary for the injunction application to be heard because when the application was served, Mr Evans (on behalf of Any Step) gave an undertaking to the Court that it “will comply with the express terms of the Licence Agreement”.
[44] Any Step says that because Precast NZ unnecessarily persisted with orders that went further than Precast NZ’s actual contractual undertaking, multiple affidavits and substantial submissions had to be made. It says this lifted the work required from band B to band C, and should be uplifted by 50 per cent because the application was so unnecessary. Accordingly, Any Step seeks costs of $16,417.50.
Discussion
[45] Ordinarily, costs on opposed interlocutory applications (other than summary judgment applications) are fixed when the application is determined.28 This reflects the principle that the merits of interlocutory applications are often different to those of the substantive proceedings.29
[46] The reason why Thomas J reserved costs was that the issues arising on the injunction application turned on the proper interpretation of the Agreement, which I determined at trial. Precast NZ failed in respect of all the interpretation issues on which it relied at the injunction hearing. On this basis, and at first blush, costs might be awarded to Any Step.
[47] Nevertheless, Precast NZ was successful in obtaining relief as a result of the interlocutory injunction hearing (albeit not the full relief it was seeking, and ultimately by consent).30 I am mindful of the Court of Appeal’s recent warnings that costs ought not to be awarded against a party that has secured some, albeit limited, relief on a hearing.31
[48] I do not agree with Any Step that the application was unnecessary because of Mr Evan’s earlier undertaking. Mr Evan’s undertaking was that Any Step would “comply with the express terms of the Licence Agreement”. The injunction application, however, sought that Any Step comply with terms beyond the “express terms of the Licence Agreement”. And Any Step ultimately agreed to an order at a very late stage (i.e. at the hearing) which had terms going beyond the “express terms of the Licence Agreement” (namely as to wilful blindness). As Thomas J noted in her costs judgment, although the orders were made by consent, the hearing was the first time Any Step offered the undertakings in the terms agreed.
[49] In those circumstances, given Precast NZ was granted some of the relief it sought, it was the “successful” party for the purposes of the application. I do not
consider the fact that the interpretation arguments it relied on at the hearing of the
28 Rule 14.8(1)(a), High Court Rules.
29 Chapham v Badon Ltd [2010] NZCA 613, (2010) 20 PRNZ 83 at [12].
30 See Thomas J’s minute dated 28 May 2015.
31 See the discussion at [16] to [18] above.
injunction application failed on the substantive hearing means it lost the status of the successful party at the interlocutory hearing.
[50] Nevertheless, Precast NZ did not secure the full relief it sought, and Any Step no doubt incurred additional costs in relation to the (ultimately unsuccessful) interpretation points. On that basis, I consider it appropriate that costs be awarded to Precast NZ on a 2B basis (i.e. in the sum of $2,587 as set out in Table A to Precast NZ’s submissions), but reduced by 50 per cent to reflect those matters referred to earlier in this paragraph.
Precast NZ’s summary judgment application
[51] Precast NZ applied for defendant’s summary judgment against Any Step’s counterclaim as to the “support clause” on the basis that it could never succeed. As noted, this was heard by Thomas J at the same time as Precast NZ’s application for an interim injunction.
[52] It is necessary to recall that Any Step alleged Precast NZ actively prevented Any Step from achieving any licensing or purchasing of the mould system, in breach of the support clause. In its counterclaim, Any Step said this breach was repudiatory, and so it was entitled to cancel the Agreement. It sought declaratory relief to that effect. In the counterclaim at the time the summary judgment application was heard by Thomas J, Any Step also claimed damages in respect of the alleged breach. By the time of trial, it had abandoned the claim for damages (and amended the claim for declaratory relief to include further attempts by Any Step to cancel the Agreement).
[53] Precast NZ applied for summary judgment on this counterclaim. Thomas J dismissed the application, albeit by a fine margin.32 She summarised her reasons for this in her later costs judgment, in which she also held that costs should not be awarded until after the substantive proceedings:33
[11] Precast had applied for summary judgment in respect of Anystep's counter claim. The grounds for the application were that the counterclaim could never succeed given that Anystep failed to serve the required notice
32 Precast NZ Ltd v Anystep Ltd [2015] NZHC 1535.
33 Precast NZ Ltd v Anystep Ltd [2015] NZHC 2244.
under the licence agreement between the parties; Anystep had affirmed the contract; and damages could never be awarded because they were purely speculative.
[12] Anystep seeks increased costs on the basis that Precast took or pursued an unnecessary step or argument lacking merit or failed without reasonable justification to admit facts, evidence, documents or accept a legal argument.
[13] I am satisfied that Precast had a reasonable case to advance on its application. Its approach in respect of the failure to serve notice and affirmation was upheld.
[14] Precast's application was unsuccessful on one ground only and even then, in my assessment, Precast had a reasonable argument as to the speculative nature of any damages.
[15] In the circumstances, I accept Precast's submission that costs should be reserved until the disposition of the counterclaim at the substantive hearing.
Submissions
[54] Precast NZ now seeks costs and disbursements on its unsuccessful summary judgment application, on the basis that its position ultimately succeeded in the substantive proceedings. It seeks costs (on a 2B basis) and disbursements, totalling
$3,518.78.
[55] Any Step opposes Precast NZ’s costs claim. It says the application was akin to a strike-out application, and although Any Step did not ultimately succeed in its counterclaim, its claim fell far short of being a baseless allegation that should have been struck out. Any Step accordingly says costs should lie where they fall.
Law
[56] Rule 14.8(3) provides that the Court’s usual approach to costs applies following summary judgment applications. But in Schmidt v Registrar-General of Land, Brewer J noted there is some support for the proposition that an application for summary judgement by a defendant should be treated differently.34 As the Court of
Appeal recently observed, there is no settled practice as to costs in such cases: 35
34 Schmidt v Registrar-General of Land [2015] NZHC 2438, (2015) 22 PRNZ 794 at [19].
35 Miah v National Mutual Life Association of Australasia Ltd [2016] NZCA 590, [2017] 2 NZLR
241 at fn 39.
There is no settled practice as to the awarding of costs when a defendant fails to obtain summary judgment. In Schmidt v Registrar-General of Land and EBS v CAS costs were reserved following an unsuccessful application. In contrast costs were awarded in Surhanan v Brookfields and Judge v Dempsey. [Citations omitted]
Discussion
[57] Having defeated Precast NZ’s claim for summary judgment, Any Step might, as a matter of principle, have been entitled to costs at the time of the hearing. Indeed, Any Step did seek costs, and on an increased basis. In the event, Thomas J reserved costs on the basis that Precast NZ’s application was unsuccessful on one ground only and its arguments on that ground were not without merit.
[58] Counting against any award being made in favour of Any Step is the fact that by the time of the substantive hearing, Any Step was no longer seeking damages against Precast NZ as a result of the breach of the support clause. Rather, it only relied on the breach as a basis for cancelling the Agreement. As such, the only basis upon which Any Step had survived the application for summary judgment had been abandoned by trial. Moreover, the events relied on at trial to support the claim of breach was refined down to only a single event. In addition, I found on the facts that Precast NZ had not breached the support clause. I also observed (consistent with Thomas J’s summary-judgment decision) that had I found a breach, I would have found that Any Step had affirmed the agreement in any event.
[59] Counting against any award in favour of Precast NZ is that it was ultimately not successful on its application. The damages claim was in play, and being an intensely factual issue, was not suited to a summary judgment application.
[60] Costs on defendant’s summary judgment applications will, as the above discussion demonstrates, be closely tied to the particular circumstances of the case in issue. In the circumstances I have outlined above, and given Any Step did survive a defendant’s summary judgment, which would have otherwise eliminated its counterclaim altogether, I do not consider it appropriate to award costs against Any Step. Rather, I agree with Any Step’s (responsible) submission that an appropriate
outcome on this particular application is that costs lie where they fall, reflecting the ultimately outcome on its counterclaim.
Interlocutory applications for joinder, further and better discovery, and non- party discovery
[61] Any Step seeks $5,519.25 costs (on a 2B basis) in relation to applications made by Precast NZ as to joinder, further and better discovery, and non-party discovery. The basis for this is that Any Step says that these applications were predominantly related to aspects of Precast NZ’s claim which ultimately failed at trial.
Application for non-party discovery
[62] Faire J heard Precast NZ’s application for non-party discovery (from Ancon and Mr Broomfield personally) on 15 June 2016. Precast NZ’ application was granted by consent (by both the third parties and also by Any Step).36 I see no reason why Any Step should be entitled to costs on this matter, given that Precast NZ was successful and Any Step consented to the application in any event. In my view, it is misguided for Any Step to claim these costs on the basis that Precast NZ’s
substantive claim (to which this application related) ultimately failed. It ignores the general rule that costs should follow the event of an interlocutory application and not depend on the outcome of the substantive hearing. This reflects the fact that, as in this case, the issues requiring consideration on a third-party discovery application are different to those being considered in the substantive hearing.
[63] Precast NZ, however, does not seek costs on the application (and the normal course is that it would meet the reasonable costs of the non-parties giving discovery). I accordingly order that costs on that application (as between Precast NZ and Any
Step) are to lie where they fall.
36 Precast NZ Ltd v Anystep Ltd HC Auckland CIV-2014-404-3171, 15 June 2016 (Minute of Faire J). It also seems that by the time Faire J considered the matter, non-party discovery was also sought against McIntosh, which was also granted by consent.
Applications for joinder and further and better discovery
[64] Palmer J heard the other applications on 22 June 2016.37 Although Any Step indicated in a memorandum (dated 20 June 2016) that it consented to Precast NZ’s application to join Any Step Holdings Ltd, the matter was ultimately adjourned.38
Neither party has addressed what became of it, and I can only assume it was not pursued.
[65] The only basis upon which Any Step seeks costs in relation to that application is as set out at [61] above. There being no other basis upon which Any Step says it should have costs in respect of Precast NZ’s application to join Anystep Holdings Ltd to the proceeding, I order that costs lie where they fall on that application.
[66] Palmer J did, however, determine costs in respect of the remaining applications, ordering Precast NZ to pay costs to Any Step (on a 2B basis) as to Any Step’s application for further and better discovery, and awarding 2B costs to Precast NZ on its application for further and better discovery. So there is no basis for Any Step to now be seeking costs across all of the applications.
[67] Precast NZ provided a schedule detailing the quantum of the parties’ respective costs for the applications consistent with Palmer J’s costs orders. I note that it does not include costs for Any Step’s preparation of submissions, or Any Step’s appearance at the hearing in respect of its own application for further and better discovery (of November 2015). I proceed on the basis that this is because no further costs were incurred by Any Step in respect of that application, Precast NZ
having responded to it in January 2016.39
[68] There being no challenge to the amounts set out in the schedule attached to
Precast NZ’s submissions (at Table C), I find that Precast NZ is entitled to costs and disbursements on its application for further and better discovery of $7,013.28, and
37 Precast NZ Ltd v Anystep Ltd HC Auckland CIV-2014-404-3171, 22 June 2016 (Minute of
Palmer J).
38 At [4].
39 Precast NZ Ltd v Anystep Ltd HC Auckland CIV-2014-404-3171, 22 June 2016 (Minute of
Palmer J) at [5].
Any Step is entitled to costs on its application for further and better discovery of
$1,772.78. Accordingly, the net amount payable to Precast NZ is $5,240.50.
Any Step’s interlocutory application for further and better discovery and other
orders
[69] Lastly, I deal with Any Step’s interlocutory application for further and better discovery and other orders. I decided that application on 17 February 2017.40 There were three issues:
(a) Any Step sought leave to file a third amended statement of claim.
Precast NZ opposed. The grounds on which it opposed leave largely related to the amended claim for the first time including a claim for account of profits (which was the basis for Any Step’s claim for further discovery – see (c) below). I granted leave for an amended statement of claim to be filed, but noted that whether or not the amended claim for an account of profits could proceed at trial would need to be considered separately.
(b)Any Step sought particulars of Precast NZ’s (unparticularised) damages claim. Precast NZ said it intended to “reserve its right” to claim damages. I ordered Precast NZ to provide the particulars sought, noting it was unsatisfactory that it pursued a damages claim which was unparticularised at such a late stage. In my substantive judgment, I also indicated that it was misconceived to purport to “reserve” damages to a later point in time.
(c) Any Step sought further discovery of matters relating to its account of profits claim. After discussion with counsel for Any Step, it was acknowledged that the discovery sought was not practicable, or indeed possible, at that late stage in the proceedings (three weeks
before trial). On that basis, I directed that Any Step’s claim for an
40 Precast NZ Ltd v Anystep Ltd HC Auckland CIV-2014-404-3171, 17 February 2017 (Minute of
Fitzgerald J).
account of profits not be dealt with at trial, and so I did not order discovery.
[70] I made no costs orders at the time. Both Precast NZ and Any Step now seek costs (on a 2B basis) in respect of the application, with Precast NZ claiming
$5,614.50 (including for second counsel), and Any Step seeking $5,519.25.
[71] Taking a broad view, it is apparent that the parties had an equal level of success in dealing with those opposed applications. I do not consider there was an overall “successful” party for the purposes of this application.
[72] I therefore consider it appropriate for costs on that application to lie where they fall.
Conclusions
[73] My orders are as follows:
(a) Costs (excluding disbursements) on the substantive proceedings are awarded to Precast NZ in terms of the table of costs sought at Table E to Precast NZ’s submissions (but adjusted to reflect the daily recovery rates in force at the time each step was taken), reduced by 80 per cent.
(b)Disbursements on the substantive proceeding are awarded to Precast NZ on the basis set out in Table E to Precast NZ’s submissions, except that the disbursement in respect of Mr Lucas’ fees is reduced by 40 per cent.
(c) Precast NZ is awarded costs on its interim injunction application (decided by Thomas J on 28 May 2015), on the basis set out in Table A to Precast NZ’s submissions, reduced by 50 per cent.
(d) Costs are to lie where they fall on Precast NZ’s defendant’s summary
judgment application (heard by Thomas J on 28 May 2015).
(e) Costs are to lie where they fall (as between Precast NZ and Any Step) on Precast NZ’s application for non-party discovery against Ancon and Mr Broomfield (heard by Faire J on 15 June 2016).
(f) Costs are to lie where they fall on Precast NZ’s application for joinder
of Anystep Holdings Ltd (adjourned by Palmer J on 22 June 2016).
(g)Precast NZ is entitled to costs in the net sum of $5,240.50, as set out in Table C to Precast NZ’s submissions, in relation to Palmer J’s costs orders dated 22 June 2016.
(h)Costs are to lie where they fall on Any Step’s application heard and determined by me on 17 February 2017.
[74] Neither party sought costs on the present costs applications/memoranda. I
accordingly order that they lie where they fall.
S Fitzgerald J
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