Unique Drinks of NZ Limited v Chia Sisters Limited

[2021] NZHC 2120

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2020-442-34

[2021] NZHC 2120

UNDER

the Trade Marks Act 2002, Fair Trading Act 1986 and the

Interest on Money Claims Act 2016

IN THE MATTER

of a breach of the Trade Marks Act 2002, breach of the Fair Trading Act 1986

BETWEEN

UNIQUE DRINKS OF NZ LIMITED

First Plaintiff

HEMP BEVERAGES LIMITED
Second Plaintiff

AND

CHIA SISTERS LIMITED

First Defendant

CHIA LIMITED
Second Defendant

BENJAMIN FRANKLIN VAN DYKE and
others

Third to Fifth Defendants (claims discontinued)

Hearing:

On the papers

Appearances:

C Mo for plaintiffs

M Robertson for defendants

Judgment:

13 August 2021

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[Costs]

UNIQUE DRINKS OF NZ LIMITED v CHIA SISTERS LIMITED [2021] NZHC 2120 [13 August 2021]

[1]    Before the Court for determination on the papers is a costs application by the third to fifth defendants, or more properly, the parties who were once the third to fifth defendants, against the plaintiffs, following the plaintiffs’ abandonment of their claims against them.

[2]    The plaintiffs commenced this proceeding in mid-2020. They sued two companies, Chia Sisters Ltd and Chia Ltd (the first and second defendants), and the directors of those companies (formerly, the third to fifth defendants).

[3]    Both the plaintiff parties and the defendant parties have provided standard discovery. The plaintiffs have sought further discovery against the first and second defendants.

[4]    In the meantime, on 2 July 2021 the plaintiffs filed an amended statement of claim in which they effectively abandoned their claims against the third to fifth defendants.

[5]    As Grice J said in her minute of 2 July 2021, although a notice of discontinuance has not been filed by the plaintiffs, the filing and service of an amended statement of claim abandoning the claims against the third to fifth defendants is directly analogous.1 In the absence of agreement, on a discontinuation (or abandonment) of a claim, the discontinuing party must pay the costs of and incidental to the proceeding up to and including the discontinuance.2

[6]    On behalf of the defendant group as a whole Mr Robertson submits that the plaintiffs should pay 20% of scale costs in respect of the commencement of the defence to the claims against them, and in respect of discovery reflecting the fact that the lion’s share of the costs would have been incurred in any event with or without the involvement of the third to fifth defendants.

[7]    In resisting any costs award against the plaintiffs, Ms Mo advances three arguments.

1      Unique Drinks of NZ Ltd v Chia Sisters Ltd HC Nelson Civ-2020-442-034, 2 July 2021.

2      High Court Rules 2016, r 15.23.

[8]Her first contention is that there was an implied agreement between the parties

— through their solicitors — that costs would not be sought on the abandonment by the plaintiffs of their claims against the third to fifth defendants. Essentially, the argument is that the plaintiffs expressly informed the defendants’ solicitors of their intention to abandon those claims and in the course of doing so asserted that as the defendants had all been represented by the same solicitors in the litigation there should be no issue as to costs. The defendants’ solicitors did not respond to this, and Ms Mo submits that the Court should treat their failure to do so as an agreement that no costs issue arose. I do not accept that submission. A party asserting that another party against whom a claim has been discontinued or abandoned is precluded from claiming costs by agreement needs to establish an actual agreement. A failure to respond to an assertion of the sort described by Ms Mo falls short of that.

[9]    Ms Mo’s second contention is that the costs claim made on behalf of the third to fifth defendants is “out of time”.

[10]   The springboard for this contention is Grice J’s minute of 2 July 2021 where her Honour said:3

As the amended statement of claim discontinued the action against some of the defendants the costs issue in relation to the discontinuance will need to be considered. I noted that costs normally follow the event in relation to a discontinuance. Therefore, this should be a straightforward matter and counsel may wish to reach an agreement in which case a memorandum should be filed. A timetable for the exchange of memoranda on that issue is made. It mirrors that for the filing and service for the amended statement of defence and reply.

[11]   Ms Mo relies on Grice J’s reference to the timetable mirroring that for the filing and service of an amended statement of defence and reply which was required to be done ten days from the date of the minute, or 12 July 2021. Her argument is that any application in respect of costs was required to be made within that same period of time. I do not accept that that was Grice J’s intention. Grice J expressly anticipated the parties attempting to reach agreement which for any number of reasons may have meant that it became impossible for the defendants to determine whether or not they

3      Unique Drinks of NZ Ltd v Chia Sisters Ltd, above n 1, at [7].

were obliged to apply for costs within that period of time. In short, I do not accept the contention that the defendants are out of time to apply.

[12]   Ms Mo’s third argument is based on the proposition that costs may never exceed actual costs. The argument is that the determination of whether or not the third, fourth, and fifth defendants were in trade — the answer to which effectively brought the proceedings against them to an end — could not reasonably have given rise to the costs now sought. The thrust of the contention is that as the plaintiffs’ claim was from the outset pursued against the first and second defendants and that there was no conflict between the interests of the companies themselves and the third to fifth defendants so that:

(a)first, the inclusion of the of the directors and officers of the first and second defendants would not have increased the costs; and

(b)second, whatever costs were involved they can be assumed to have been rendered to the first and second defendants rather than the directors and officers.

[13]   I do not accept this argument. Mr Robertson contends persuasively that there were additional costs incurred by the defendants as a whole as a result of the inclusion of the third to fifth defendants in the claim. Indeed, it seems to me that must inevitably have been so because claims of the sort involved in this case when levelled against the directors of the principal defendants always raise additional issues as to such things as the extent to which personal liability can rest with those directors and officers. And it seems to me that the Court should not be drawn into dealing with costs issues of this sort on the basis of the party or parties to whom a solicitor’s invoice is addressed. The question is whether the party or parties seeking costs had an underlying responsibility in respect of those and it appears to me that it must necessarily be the case that all of the defendants had collective responsibility for the costs being incurred in the defence of this proceeding.

[14]   Thus I reject the bases upon which the plaintiffs resist a costs order consequent upon the abandonment of their claim against the third to fifth defendants. Standing

back from the matter it appears to me that the analysis carried out by Mr Robertson on behalf of the defendant group — that is to say that the additional costs incurred thus far in the proceeding ought to be divided as to 80 per cent having been incurred by the first and second defendants and 20 per cent having been incurred by the third to fifth defendants is a generous approach. The arithmetic that follows gives rise to a legitimate costs claim on behalf of the third to fifth defendants of $2,151.00.

[15]I order that the plaintiffs pay to the third to fifth defendants the sum of

$2,151.00 consequent upon the abandonment of their claim against them.

Associate Judge Johnston

Solicitors:

Saunders & Co Lawyers, Christchurch for plaintiffs Robertsons, Auckland for defendants