Todd Taranaki Limited v Energy Infrastructure Limited HC Wellington CIV-2007-485-1803

[2008] NZHC 2483

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2007-485-1803

UNDER  the Arbitration Act 1996

IN THE MATTER OF        an arbitration

BETWEEN  TODD TARANAKI LIMITED First Applicant

AND  TODD POHOKURA LIMITED Second Applicant

AND  ENERGY INFRASTRUCTURE LIMITED First Respondent

AND  SHELL EXPLORATION NZ LIMITED Second Respondent

CIV-2007-485-2420

UNDER

IN THE MATTER OF

the Arbitration Act 1996

an arbitration

BETWEEN

TODD TARANAKI LIMITED First Applicant

AND

TODD POHOKURA LIMITED Second Applicant

AND

SHELL TODD OIL SERVICES LIMITED First Respondent

AND

ENERGY INFRASTRUCTURE LIMITED Second Respondent

AND

SHELL EXPLORATION NZ LIMITE Third Respondent

Hearing:

On the papers

Counsel:         H McIntosh and A Olney for the applicants

J E Hodder and N S Wood for the respondents

Ruling:           5 August 2008

RULING AS TO COSTS OF CLIFFORD J

TODD TARANAKI LTD AND ANOR V ENERGY INFRASTRUCTURE LTD AND ANOR HC WN CIV-

2007-485-1803  5 August 2008

Introduction

[1]     The applicants (“Todd”) and the respondents (“Shell”) in each of these proceedings are parties to arbitration proceedings, the substantive hearing for which concluded in March 2008.

[2]      In 2007 the applicants commenced these proceedings in the High Court to resolve issues that had arisen in those arbitration proceedings.   The applicants subsequently discontinued both these proceedings.  The respondents now seek costs.

[3]      For different reasons as between each proceeding, the applicants oppose the orders the respondents seek.

[4]      The general rule, set out in Rule 576C, is that a plaintiff who discontinues against a defendant must pay costs, unless the Court orders otherwise.

[5]      Baragwanath  J  put  the  position  as  follows,  in  Oggi  Advertising  Ltd  v

McKenzie (1998) 12 PRNZ 535:

The normal principles as to costs are as stated in North Shore CC v Local

Government Commission (1995) 9 PRNZ 182, namely:

(1)In terms of r 476 there is a presumption that a discontinuing plaintiff will be liable for costs;

(2)Where, as is the usual case, the Court is unable to determine what would have been the outcome of the trial that never took place, it will not strive to speculate as to the answer as determining costs;

(3)The presumption is, nonetheless, rebuttable in the exceptional cases where the merits are clear

But subject always to the overriding provision of r 46 that:

“all matters relating to the costs of or incidental to any proceeding or any step therein shall be in the discretion of the Court.”

Nevertheless care must be taken to conform with the general principles developed by  the  Courts.    In  particular,  as  observed  in  the  North  Shore  CC  case,  it  is appropriate to determine whether the plaintiff acted reasonably in commencing the proceedings and whether a particular defendant acted reasonably in defending them.

CIV-2007-485-1803

[6]      In  these  proceedings  Todd  sought  to  challenge  various  decisions  of  the arbitrator dealing with discovery issues.  Todd filed a notice for leave to appeal and an application to set aside various of the arbitrator’s awards.  In support Todd filed an affidavit from Todd’s General Counsel which appended a bulky record of the arbitration.  In an accompanying memorandum, counsel for Todd said that it would have been preferable for the application to await further discovery determinations by the arbitrator, but that the application had been filed prior to the expiry of time limits under the Arbitration Act to preserve the position.  That memorandum concluded:

In those circumstances, it is respectfully requested that this application be adjourned, and that no further steps  be taken  pending resolution  by the arbitrator of the discovery application referred to in paragraph 2 above.  It is suggested that the appropriate course would be for the applicants to file a memorandum advising of the position within seven days of the Arbitrator’s determination of that application and, in any event, within one month of the date of this memorandum.

[7]      On 31 August 2007 the respondents filed a notice of opposition, supported by a memorandum from Shell’s counsel and an affidavit appending additional material. In their memorandum counsel for Shell sought an urgent hearing of Todd’s application.  Shell did so, in general terms, on the basis that they were concerned that what they termed interlocutory skirmishes on discovery (which were in their  view a continuation of earlier, unsuccessful, applications) had the potential to jeopardise the substantive fixture for the arbitration set down for December.

[8]      On 23 October, Todd discontinued the proceedings.   The question of costs was reserved.

[9]      In a memorandum of 11 June, Counsel for Shell sought costs in the sum of

$4,160.00 on a 2B basis, made up as follows:

Step	Allocated days	Costs
Commencement of defence (31.8.07)	2	$3,200.00
Filling of memorandum (31.8.07)	0.4	$640.00
Appearance  at  mentioned  hearing  or  callover (3.10.07)	0.2	$320.00
Total	$4,160.00

[10]     Based on correspondence received, Counsel for Shell had anticipated that Todd’s position would be it should only have to pay $320.00 costs, because the steps taken by Shell in filing the notice of opposition and memorandum were unnecessary. It was Shell’s submission that it was not open to Todds to commence the proceeding, and then “unilaterally to put it on ice”.  Shell had an obligation under the rules to file a defence, and had done so in reasonable fashion.

[11]     As anticipated, Todd opposed the application on the basis that it had only filed the application to preserve its right to challenge the awards.  The arbitrator’s subsequent ruling, ordering discovery denied under the earlier rulings, had made Todd’s application redundant and so Todd had immediately discontinued it.  If Shell had not taken the proceedings it did, it would not have been prejudiced.   Further, Shell’s unexplained delay of almost 8 months before filing its application for costs was unreasonable.

[12]     In the context of what were obviously strongly contested arbitral proceedings, involving  numerous  interlocutory  applications  both  to  the  arbitrator  and  to  this Court, I do not think Shell acted unreasonably in the way in which it prepared and filed its notice of opposition to Todd’s application. I accept that, as matters would appear to have transpired, Shell might have responded by simply filing a pro forma notice of opposition, and a simple memorandum.  That it went further than that, and explained its substantive position to the Court and developed its argument as to why Todd’s application should be set down for an urgent hearing, was in my judgment not an unreasonable step to take, in terms of the proceedings commenced by Todd in this Court.

[13]     It was Todd’s further submission that an application to the High Court arising out of arbitration is an interlocutory application (Rule 458D(5)) requiring a notice of opposition, not a defence. Todd no doubt make that point on the basis that earlier applications had been made to this Court arising out of these arbitral proceedings.  I simply note that Todd did not commence its proceedings in that way.

[14]     I do not consider the delay point has merit.  Counsel for Shell explained, in their memorandum to the Court, that following the completion of the substantive hearing in March 2008, they had written to Counsel for Todd to see if costs in respect of both proceedings could be agreed, without the need to apply to Court. They had only received Todd’s substantive reply the week prior to making their application to Court.  It was apparent to them that costs would not be agreed between the parties.  Hence the filing of the memorandum.  I accept that explanation.

[15]     On that basis, there will be a costs order in favour of Shell as applied for in the sum of $4,160.00.

CIV-2007-485-2420

[16]     In these proceedings, Todd applied for non-party discovery in the High Court against Shell Todd Oil Services Limited, as the non-party.   Todd alleges it was forced to take this step by Shell’s lack of co-operation.

[17]     The only step taken by Shell in these proceedings in respect of which an order for costs is sought by them is their filing a notice of opposition.  Shell seeks costs of $960, being the .6 days allowed by Schedule 5.

[18]     In its memorandum, Todd notes that its application was listed for call on 3

December, the day the arbitration hearing started, and was eventually listed for 10

December 2007.  On 7 December 2007, Todd discontinued this proceeding.  It would also appear that the discovery sought had, at least in part, been procured by Shell from Shell Todd Oil Services on 19 and 22 November 2007.

[19]     In opposing Shell’s application, Todd submits that the adequacy of Shell’s discovery remains a live issue in the arbitration and that, once the final award has been delivered in the arbitration, Todd will be seeking all its costs of, among other things,   the   non-party   discovery   application   from   Shell   in   that   arbitration. Accordingly, Todd submits that this Court should make an order that the costs of the application are a matter to be determined in the arbitration.   Alternatively, on the basis of Todd’s submissions as to the merits of application, this Court should order that Shell should pay Todd’s costs.

[20]     Todd having applied to this Court, and subsequently having discontinued that application, in my view the general principle applicable in Oggi applies.   I do not think the step taken by Shell was unreasonable.  Moreover, I am not in a position to reach any view on the merits of Todd’s claims in these proceedings, so as, in the manner submitted by Todd, to make an award of costs in favour of Todd.

[21]     Accordingly, there will be an award of costs in favour of Shell as sought of

$960.00.

“Clifford J”

Solicitors:         Russell McVeagh, Wellington for the applicants.

Chapman Tripp, Wellington for the respondents.