Sunlec International Pty v Electropar Limited HC Auckland CIV 2007-404-005044

[2008] NZHC 2673

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2007-404-005044

UNDER  The Copyright Act 1994

BETWEEN  SUNLEC INTERNATIONAL PTY LIMITED

Plaintiff

ANDELECTROPAR LIMITED First Defendant

ANDGRANT LACHLAN WALLACE Second Defendant

ANDCAMERON LACHLAN WALLACE Third Defendant

ANDTONY LACHLAN WALLACE Fourth Defendant

Hearing:         On the papers

Appearances: K McLeod and M Hayes for the Plaintiff

G Williams for the First, Second, Third and Fourth Plaintiffs

Judgment:      6 November 2008 at 3.30PM

COSTS JUDGMENT OF WYLIE J

This judgment was delivered by Justice Wylie on 6 November 2008 at 3.30pm

pursuant to r 540(4) of the High Court Rules

Registrar/Deputy Registrar

Date:

Solicitors:

A J Park, P O Box 565, Auckland

Bell Gully, P O Box 4199, Auckland

SUNLEC INTERNATIONAL PTY LTD V ELECTROPAR LTD AND ORS HC AK CIV 2007-404-005044  6

November 2008

[1]      My judgment in relation to this matter was delivered on 24 September 2008. I expressed the preliminary view that costs should lie with they fall, but invited the parties to file submissions if they wished to pursue the issue of costs.

[2]      I have received submissions from both parties.  They raise a number of issues of which I was unaware.

[3]      Sunlec  is  prime  facie  entitled  to  an  award  of  costs  because  it  was  the successful party in this litigation – r 47(a) of the High Court Rules.   It transpires however that various offers were made by Electropar to Sunlec prior to the hearing under r 48G and the application of r 48GA has to be considered.  There are a number of further factors to be considered in fixing costs in this case which counsel have raised.

[4]      First  I  note  that  both  parties  have  proceeded,  at  least  initially,  in  their respective submissions on the basis that costs should be calculated on a 2B basis. Insofar as I can see from the Court file, the appropriate basis for calculating costs has not previously been fixed by the Court.  In my view category 2B is appropriate.  I deal with Electropar’s claim for increased costs below.

[5]      Secondly, it is said on behalf of Electropar that the proceedings should have been brought in either the Disputes Tribunal or the District Court.

[6]      I  accept  the  submissions  lodged  on  behalf  of  Sunlec  that  the  Disputes Tribunal does not have jurisdiction to deal with claims arising under the Copyright Act 1994.   I refer to s 11(5)(c)(iv) of the Disputes Tribunals Act 1988, and the definition of “intellectual property” contained in that Act.

[7]      The proceedings could have been brought in the District Court.   That is accepted by Sunlec.   Sunlec submits that given the nature and complexity of its claims,  it  acted  responsibly  in  pursuing  the  proceedings  in  the  High  Court. Electropar says that the issues raised were not complex and that the amount potentially   recoverable   by   Sunlec   was   always   within   the   District   Court’s jurisdictional limit.

[8]      By a narrow margin,  I accept Sunlec’s submissions in this regard.   The proceedings raised the issue of whether or not copyright can exist in a slogan.  As I noted in my judgment at [60], there was relatively little New Zealand authority on that point, and in my view Sunlec did not act irresponsibly in filing the proceedings in the High Court.   I also note that Electropar could have applied to  have the proceedings referred to the District Court, but that it did not do so.

[9]      Thirdly, Electropar submits that Sunlec conducted the proceedings in such a way as to deliberately maximise the costs Electropar would have to incur.  I do not accept  this  submission.    The  proceedings  moved  relatively  quickly  through  the Court. They were filed on 17 August 2007, the hearing was held on 25 August 2008, and judgment was given on 24 September 2008.  Despite submissions to the contrary from Electropar, I am satisfied that the proceedings were conducted appropriately and economically.  Relatively little time was taken up with interlocutory matters, and at the hearing the issues were narrowed, with the co-operation of both Sunlec and Electropar.

[10]     I now turn to the more difficult issue – namely the Calderbank letters sent by Electropar to Sunlec prior to the hearing and the effect of these on costs under r 48GA.

[11]     Sunlec succeeded at trial, but I only awarded it nominal damages.  I also held that it was entitled to an injunction restraining Electropar from reproducing or using the three copyright works the subject of the proceeding.

[12]     On 1 November 2007, Electropar sent a Calderbank letter to Sunlec offering to  settle  in  the  sum  of  $5,000.    It  offered  not  to  use  the  various  infringing photographs, to destroy all hard copy materials in its possession which contained any of the photographs, to delete all electronic copies of the photographs, and not to use the phrases, “How it works – Four Easy Steps” and “‘Field Friendly’ – the best choice for field work”.   It proposed that the terms of settlement should remain confidential.

[13]     That offer was rejected by Sunlec.   It estimated its costs at that stage were

$9,860 (including Court filing fees) and it considered that the sum offered was insufficient.

[14]     A further offer was made by Electropar on 13 May 2008.  It  offered to pay Sunlec the sum of $15,000.   Otherwise the terms were similar to those detailed above.

[15]     This offer was rejected by Sunlec.  It asserted that the offer did not exceed that which Sunlec would be able to obtain from the Court, and that the undertakings offered were not equivalent to a Court order.

[16]     On 8 July 2008, Electropar sent a further letter to Sunlec’s solicitors offering

$23,000, and advising that Electropar was prepared to give undertakings, which could be incorporated in a Tomlin order.

[17]     Sunlec replied on 23 July 2008, indicating that it was prepared to settle if Sunlec  made  a  payment  of  $52,000  towards  its  costs  and  damages,  and  if Electropar’s directors – the second to fourth defendants – signed a letter of apology.

[18]     The effect of written offers made without prejudice except as to costs is detailed in r 48GA.  It provides as follows:

(1)      The effect (if any) that the making of an offer under rule 48G has on the question of costs is at the discretion of the Court.

(2)      … (3)     …

(4)      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,—

the principle to be applied in determining costs is that party A is entitled to costs on the steps taken in the proceeding after the offer is made.

(5)       If an offer made by party A does not fall within paragraph (a) or paragraph (b) of subclause (4), but is close to the value or benefit of the judgment obtained by party B, the principle to be applied in determining costs is that the offer may be taken into account.

[19]     Here  each  of  the  offers  made  exceeded  in  monetary  terms  the  amount ultimately awarded by me.  Sunlec is correct when it submits that the first two offers did not provide for any Court order, but I am not persuaded that they should have been rejected on that basis.  Had a contractual undertaking been given by Electropar and its directors as was proposed, then that undertaking could have been enforced through the Courts if that proved necessary.   In my view the first two offers were close to the value or benefit of the judgment obtained by Sunlec and the fact of those offers should be taken into account.

[20]     As a result I have determined that Sunlec as the successful party is entitled to costs on a 2B basis and to its disbursements up to the date that Electropar’s first offer expired, namely Wednesday 7 November 2007.  Electropar is entitled to its costs on a 2B basis and to the disbursements as from that date.

[21]     Sunlec has not supplied a schedule of its costs up until 7 November 2007.  It should however be a relatively straightforward exercise to make the necessary calculation.  According to the Court file, a first amended statement of claim was filed on 29 October 2007.  Thereafter no other documents were filed or steps taken until an amended statement of defence was filed by Electropar on 21 November 2007. Sunlec is entitled to its costs involved in commencing the proceedings, to making an interlocutory application for directions, to preparing the statement of issues and joint memorandum for the mentions hearing on 24 August 2007, and for filing its verified list of documents on 5 October 2007.  If there is any dispute the same can be referred to me.

[22]     Electropar has supplied me with a schedule of its costs calculated on a 2B basis as from 7 November 2007.   It claims costs in the sum of $20,000.   The schedule seems to me to be accurate and it has not been disputed by Sunlec.  I direct that Electropar is entitled to costs in that sum.

[23]     Disbursements are to be fixed by the Registrar in the event of disagreement.

[24]     I suspect that Electropar’s  costs will exceed those of  Sunlec.    Sunlec  is entitled to offset such sums as are payable to it against such sums as are payable to Electropar.

[25]     For the sake of completeness, I record that Electropar submitted that it should receive an award of increased costs because Sunlec failed to accept what it says were generous offers in the circumstances.

[26]     I do not accept that submission.  Any award of increased costs is governed by r 48C, and the circumstances in which the Court can order a party to pay increased costs are detailed in r 48C(3).   While I accept that it is open to me to order increased costs under r 48C(3)(b)(v), in my view this is not an appropriate case for such an award.   In my view both parties have been obstinate in the positions they have respectively taken.  Electropar was difficult in the stance it took prior to its letter of 1

November 2007 and it effectively forced Sunlec to issue the proceedings.   This seems to have coloured the proceedings thereafter and resulted in something of an overreaction by Sunlec.  In the circumstance in my view it would be inappropriate to penalise Sunlec by an uplift in the costs payable by it.

Wylie J