Telfer Electrical Nelson v Trotter
[2018] NZHC 171
•16 February 2018
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE
CIV-2017-442-33
[2018] NZHC 171
BETWEEN TELFER ELECTRICAL NELSON
Plaintiff
AND
KENNETH JOHN TROTTER
First Defendant
DUNCAN COTTERILL NELSON TRUSTEE (2010) LIMITED, GAIL
ELIZABETH TROTTER AND KENNETH JOHN TROTTER AS TRUSTEES OF THE K & G TRUST
Second Defendants
Hearing: On the papers Counsel:
G A Cooper for Plaintiff
J C Ironside for Defendants
Judgment:
16 February 2018
JUDGMENT OF CHURCHMAN J
Background
[1] By interlocutory application dated 30 May 2017 the plaintiff applied for an interim injunction restraining the first defendant from being employed by NZ Electrical Solutions Ltd (NZESL).
[2] That application was heard on 12 December 2017 and a judgment dismissing it issued on 15 December 2017.
TELFER ELECTRICAL NELSON v TROTTER [2018] NZHC 171 [16 February 2018]
[3] The parties have been unable to agree costs and have filed memoranda. The defendants’ memorandum was dated 22 December 2017 and the plaintiff’s 1 February 2018.
[4]The defendants seek:
(a)costs in relation to successfully opposing the plaintiff’s interlocutory application for an interim injunction;
(b)costs in relation to their application to exclude defined parts of the plaintiff’s reply evidence, dated 28 November 2017;
(c)in respect of the above two interlocutory applications, increased costs under High Court Rules 2016 (“HCR”) 14.6(3)(b)(ii) or (d); alternatively, costs on a 2B basis;
(d)as the defendants are not registered for GST and therefore unable to claim for GST, the defendants seek GST in relation to disbursements;
(e)the Court’s approval for the inclusion of Professor Graeme Guthrie’s invoice as a disbursement under HCR 14.12(2).
[5]The plaintiff disputes the defendants’ cost application on three grounds:
(a)that the defendants have included items to which they are not entitled in the interlocutory application;
(b)the defendants are not entitled to costs for their application to exclude evidence; and
(c)it is not fair or reasonable to claim an uplift in costs in the circumstances.
[6]The plaintiff seeks an order that:
(a)determination of the costs be reserved pending the outcome of the defendants’ appeal as to jurisdiction of this Court and the final determination of the substantive proceedings; or alternatively
(b)an award of costs of $6,913.00.
Application by plaintiff to reserve costs
[7] As the plaintiff has submitted that this is an appropriate case for costs to be reserved pending the outcome of an appeal lodged by the defendants to their protest as to jurisdiction which was determined by Dobson J on 17 October 2017, I will address that issue first.
[8] The submission of the plaintiff is that, if the defendants’ appeal to the Court of Appeal is successful, any orders made by this Court (including any order as to costs) cannot stand due to the Court’s lack of jurisdiction to make such orders.
[9] This proposition is not accepted. The application for an injunction came before the Court at the plaintiff’s insistence. The plaintiff was aware that the defendants had appealed the jurisdictional point to the Court of Appeal but nonetheless sought (as it was entitled to do) a ruling from the Court in relation to its application for an interim injunction restraining the first defendant from being employed by NZESL.
[10] The Court was therefore obliged to consider that interim application and to issue a decision.
[11] Whatever the Court of Appeal may ultimately do with the defendants’ substantive appeal, this Court, at the plaintiff’s insistence, was required to hold a hearing on the plaintiff’s application for an interim injunction.
[12] The Court had jurisdiction to hold such a hearing and, indeed, had no option given the plaintiff’s insistence that it wanted its injunction application heard.
[13] Having insisted that the Court deal with its interim injunction application notwithstanding the pending appeal, the plaintiff cannot complain, having been unsuccessful in that application, that it is ordered to pay costs in respect of it.
[14] If the defendants’ appeal to the Court of Appeal is ultimately successful, it does not follow that the order for costs on the plaintiff’s interim injunction application will have been found by the Court to have been made without jurisdiction.
[15] Having put the defendants to the trouble of defending the interim injunction application, the plaintiff must accept that it is liable for costs, having failed in its application. Whatever the decision of the Court of Appeal may be on the defendants substantive appeal will not alter the fact that the plaintiff required its application for an interim injunction to be determined and, having been unsuccessful in that application, is liable to pay costs.
[16] The plaintiff has further submitted that a trial court will be better placed once all the evidence around the Record of Settlement, Mediation, Employment Agreement and surrounding circumstances is fully ventilated, to determine the costs. That submission is not accepted either. The application for an interim injunction was a discrete application. It was part of one of four separate causes of actions pleaded in the statement of claim. It is discrete from the other causes of action.
[17] Consideration at the substantive trial of issues around the record of settlement and similar matters will not in any way alter the outcome of the interim injunction application.
[18] The plaintiff was entitled to ask the Court to determine its application for an interim injunction as a discrete matter. Substantial costs were incurred by the defendants in responding to the application. The application having been wholly unsuccessful, it is appropriate that costs be fixed and payable. Whatever the outcome of the substantive litigation, this Court has found that there was no basis for an application for an interim injunction and that finding should appropriately be reflected in an award of costs.
[19] I reject the submission that the ultimate trial court will be better placed to determine costs in this matter. This is a discrete application and all the information necessary for the determination of costs is available to the Court now.
Costs in respect of the two interlocutory applications
[20] The defendants seek costs in relation to successfully opposing the plaintiff’s interlocutory application for an interim injunction. The defendants also seek costs in relation to their application to exclude defined parts of the plaintiff’s reply evidence, dated 28 November 2017.
[21] In respect of the above two interlocutory applications, the defendants seek increased costs under High Court Rules 2016 14.6(3)(b)(ii) or d; alternatively, costs on a 2B basis.
[22] An allowance for second counsel is sought, both plaintiff and defendants having been represented by two counsel.
[23]The plaintiff objects to several items on the costs schedule:
(a)the items attributable to step 36 – other steps in proceeding not specifically mentioned;
(b)step 30 – defendants’ preparation of affidavits;
(c)step 27 – costs for second counsel; and
(d)costs in relation to the “interlocutory application to exclude parts of plaintiff’s evidence”.
[24]I will address each of these items in turn.
[25] Costs are at the discretion of the court.1 However, this discretion has never been unfettered and must be exercised judicially.2 Step 36 allows the Court to award costs that have not been specifically mentioned in the costs schedule. However, this step comes under the heading of ‘trial preparation and appearance’ rather than ‘interlocutory applications’. Therefore, this step is not available for an interlocutory application for an interim injunction. The costs claimed for filing the memorandum for timetabling the interlocutory application, along with the costs for preparing and filing a memorandum in respect of costs, are therefore not approved.
[26] Similarly, step 30 also comes under the heading of ‘trial preparation and appearance’. Therefore, costs for the defendants’ preparation of affidavits are not approved.
[27] The plaintiff is objecting to the inclusion of second counsel on the basis that the Court did not authorise costs for two counsel. However, both the plaintiff and the defendants were represented by two counsel and this case was of sufficient complexity to require two counsel. Costs for second counsel are therefore approved.
[28] The requirements for an interlocutory application are set out in Part 7, Subpart two of the High Court Rules 2016 which includes that an application must be in the prescribed form.3 The plaintiff submits that the defendants’ application was not in the prescribed form but rather in the form of a memorandum of counsel.
[29] The plaintiff further submits that such an interlocutory application was unnecessary as it is accepted practice for any issues as to admissibility of evidence to be brought before the Court and dealt with at the hearing as opposed to pre-trial applications.4 In addition, this application by the defendants was largely unsuccessful.
[30] I accept with these propositions and costs will not be awarded for the interlocutory application to exclude parts of plaintiff’s evidence.
1 High Court Rules 2016, r 14.1.
2 Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA) at [9].
3 High Court Rules 2016, r 7.19.
4 French v Black & Eades [2015] NZHC 2519 at [10]–[13].
Increased costs
[31] Under the High Court Rules 2016 14.6(3)(b)(ii), increased costs may be awarded where the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or steps in it by taking or pursuing an unnecessary step or an argument that lacks merit.
[32] Rule 14.6(3)(d) provides for increased costs where some other reason exists which justifies the Court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
[33] The defendants submit that in seeking to restrain Mr Trotter from taking up employment with NZ Electrical Solutions Limited (“NZESL”), claiming this was a business that was the same or similar to Telfer Electrical Nelson Limited’s (“TENZ”) business, the plaintiff was pursuing an argument that lacked merit. On proper consideration of that argument, it should have been clear to TENZ that it had no merit.
[34] The defendant further submits that TENZ made a number of unsupportable allegations on this issue such as that the industry was a small one, that there was a significant amount of ‘cross over’ between wholesalers and the work of electrical contractors, and that NZESL simply added a labour component to what they sold.
[35] It is also asserted that TENL failed to address the critical issue of what proprietary interests were at stake and how Mr Trotter’s employment with NZESL put those proprietary interests in jeopardy.
[36] The evidence of TENL, it is argued, contained a large amount of hearsay, speculation, general assertion and irrelevant evidence, as well as matters that were not strictly in reply. Statements made during a confidential MBIE mediation were also put into evidence. The defendant submits that this behaviour indicates an intention by the plaintiff to act unreasonably and to unnecessarily increase the defendant’s costs.
[37] Counsel for the plaintiff disputes that the plaintiff has been unreasonable or is guilty of any misconduct, stating that its argument on the restraint was not without merit. While it may have been found on an interim basis that the businesses of NZESL
and TENL were not similar, this issue will be fleshed out in the substantive proceedings when all the business dealings will be discoverable and witnesses will be capable of being called and cross examined.
[38] The plaintiff also asserts that, while it might be contended that the plaintiff breached confidentiality, the defendants also breached the confidentiality of the record of settlement by making submissions to the Court on its terms.
[39] I am not satisfied that this is a proper case for increased costs. While the plaintiff did not succeed in its argument on the restraint, its argument was not without merit. I am also not satisfied that the plaintiff contributed unnecessarily to the time or expense of the proceedings to such an extent as to justify an uplift of costs.
GST in relation to disbursements
[40] A GST-registered party will generally recover a GST input credit for the GST paid to its solicitor, and therefore costs on disbursements should be GST-exclusive.5
[41] The defendants, however, are not registered for GST and are unable to claim for GST. They therefore seek GST in relation to disbursements.
[42] The plaintiff, however, submits that the defendants are not paying the fees but rather NZESL is. Therefore, any GST on those invoices can be claimed back by NZESL in the ordinary way. The plaintiff relies on an affidavit sworn by Mr Collett in which he reports at [5]:
Mr Comer started by saying that he has got a bill for over $50,000k [sic] from his lawyers and his will only get higher from the extra work involved.
[43] I do not accept that this is sufficient evidence to establish that NZESL is paying the defendants’ legal fees. But even if they were, as the service was rendered to the defendant and not NZESL, NZESL could not claim the GST input credit.
5 New Zealand Venue and Event Management Limited v Worldwide NZ LLC [2016] NZCA 282 at [6].
[44] This is therefore an appropriate case for the costs on disbursements to be awarded on a GST-inclusive basis.
Inclusion of Professor Graeme Guthrie’s invoice as a disbursement
[45] Under the High Court Rules 2016 14.12(2), a disbursement must be specific to the conduct of the proceeding, reasonably necessary for the conduct on the proceeding, and that the sum claimed was reasonable in amount.
[46] In the case of Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd, Katz J held that the party claiming costs:6
… bears the onus of satisfying [the Court], on the balance of probabilities, that the expert disbursements it seeks to recover were reasonably necessary for the conduct of the proceeding and reasonable in amount.
[47] The defendants seek approval for the inclusion of Professor Guthrie’s invoice as a disbursement under High Court Rules 2016 14.12(2). He provided services as an expert witness and his expenses in relation to those services were specific to and reasonably necessary for the conduct of the defendants’ opposition to the application for an interim injunction, and were reasonable in amount. The Court found that he was appropriately qualified to give evidence as an expert and that his evidence was admissible and helpful.7
[48] The plaintiff disputes paying his invoice, arguing that it is exorbitant and there is insufficient breakdown of his invoice to understand how the amount claimed is made up.
[49] In this case, the invoice from Graeme Guthrie of $5750.00 states that it is for “preparation of affidavit comparing NZES and TENZ”. It is for 7.58 hours of work, charged at an hourly rate of $660.
[50] I do not accept the plaintiff’s submission that Mr Guthrie’s fee was exorbitant and find that his services as an expert witness were specific to and reasonability
6 Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd [2015] NZHC 470 at [50].
7 Telfer Electrical Nelson Limited v Trotter [2017] NZHC 3155 at [104]–[105].
necessary for the conduct of the proceeding. The hourly rate is high but not beyond the range for similar experts seen by this Court. The hours of work claimed are commensurate with the work product produced. The evidence was of some assistance to the Court. Therefore, I grant the defendants approval to include his invoice as a disbursement.
Defendant’s costs
Scale costs: Schedule B – daily rate is $2,230
Step Description Time
Allocation
Amount Interlocutory application for an interim injunction 23 Filing opposition to interlocutory
application
0.6 day $1,338 24 Preparation of written submissions 1.5 days $3,345 26 Appearance at hearing 0.5 day $1,115 27 Second counsel 0.25 day $557.50 Total time 2.85 days $6,355.00 Disbursements Photocopying and couriers (inc GST) $163.30 Professor Guthrie’s invoice (inc GST) $5,750 Filing fee for notice of opposition $110 Total disbursements $6,023.30 Total costs and disbursements $12,378.30
Conclusion
[46] Accordingly, judgment is given in favour of the defendant in the sum of
$12,378.30.
Churchman J
Solicitors:
Cavell Leitch, Christchurch for Plaintiff Ironside Law Ltd, Brightwater for Defendants
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