Vector Limited v Stuff Limited

[2018] NZHC 1680

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-000820

[2018] NZHC 1680

BETWEEN

VECTOR LIMITED

Plaintiff

AND

STUFF LIMITED

Defendant

Hearing:	(On the papers)
Counsel:	Andrew Brown QC for the Plaintiff Robert Stewart for the Defendant
Judgment:	10 July 2018

[COSTS] JUDGMENT OF MOORE J

This judgment was delivered by me on 10 July 2018 at 12:00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar Date:

VECTOR LIMITED v STUFF LIMITED [2018] NZHC 1680 [10 July 2018]

Introduction

[1]    In April this year an App developed by Vector Ltd (“Vector”) was hacked. Confidential data of up to 24,000 customers was accessed.

[2]    When this data came into the possession of Stuff Ltd (“Stuff”), Vector sought an interlocutory injunction restraining Stuff from using the data in any way, including copying, retaining, or distributing it. It also sought that any physical copies of the data be delivered up to the Registrar of the High Court at Auckland.

[3]    Stuff consequently provided undertakings, which have in effect brought these proceedings to a close. Vector now seeks costs.

Background

[4]    The data acquired contained the names, physical addresses, email addresses and telephone numbers of up to 24,000 Vector customers. The anonymous hacker provided the data to Stuff, which published an article on its website about the data breach on 26 April 2018, titled “Thousands of ‘vulnerable’ customers’ private data shared by Vector App”. As part of that article, Stuff contacted one of the people named in the data, an Auckland-based celebrity, for comment.

[5]    Once it received notice of the article, Vector wrote to Stuff requesting confirmation that the confidential and personal information would be promptly returned or “destroyed or isolated or secured and [would] not be used”. It made two further requests on 27 and 28 April 2018. On each occasion Stuff refused.

[6]    Vector accordingly brought proceedings on 2 May 2018 alleging breach of confidence. It was Vector’s position that Stuff’s continued possession of the data and its use to contact one of Vector’s customers was in breach of confidence. The same day it filed an application for an interlocutory injunction restraining Stuff, in short, from using the data in any way, including copying, retaining, or distributing it.

[7]    The matter was called  on  7  May  2018  as  part  of  the  duty  judge  list.  Mr Brown QC, who appeared for Vector, advised that Stuff indicated the confidential

customer data had been removed from its computer system. In order to bring an end to the proceeding, I asked that the matter be listed for appearance on 9 May 2018, with a view to a joint memorandum being filed.

[8]    A memorandum was filed on 8 May 2018. In it Stuff made various undertakings which resolved the application for an interim injunction, and in short order this proceeding will likely be discontinued. But costs were not agreed, hence this application.

Relevant costs principles

[9]    While costs are at the discretion of the court,1 there is a longstanding and “fundamental principle” that in all general courts in New Zealand costs should follow the event.2 There is also a strong implication that a Court is entitled to apply the detailed costs regime provided in the High Court Rules 2016 in the absence of some reason to the contrary.3

[10]   Despite the usual rule that costs follow the event,4 there are various circumstances in which a costs award may be refused or reduced. That includes where the party claiming costs has unnecessarily contributed to the time or expense of the proceeding.5

The application for costs

[11]   As the successful party, Vector seeks costs on a 2B basis for the steps taken to date in these proceedings:6

Item	Description	Daily rate	No. of days	Total
1	Commencement of proceeding by plaintiff	$2,230	3	$6,690

1      High Court Rules 2016, r 14.1.

2      Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [8].

3      Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt) Ltd (2002) 16 PRNZ 662 (CA) at [27], cited with approval in Manukau Golf Club Inc v Shoye Venture Ltd, above n 2, at [7].

4      High Court Rules 2016, r 14.2(a).

5      Rule 14.7(f).

6      See Schedules 2 and 3 of the High Court Rules 2016.

Item	Description	Daily rate	No. of days	Total
11	Filing memorandum for first case management conference	$2,230	0.4	$892
12	Two appearances at mentions hearing or callover	$2,230	0.4	$892
22	Filing interlocutory application for directions as to service	$2,230	0.6	$1,338
–	Filing costs submissions	$2,230	0.6	$1,338
Total Costs	5	$11,150

[12]   Vector claims to be the successful party because by the undertakings, it has secured the relief it sought in its written correspondence, interlocutory application, and statement of claim. Mr Brown submits the bringing of this proceeding was made necessary by Stuff’s refusal to destroy or return the information. He adds interim relief was made necessary by the evidence Stuff had misused the information in its possession to contact a Vector customer, and that filing a proceeding in this Court was the only means by which interim relief could be obtained.

Stuff ’s position

[13]   Mr Stewart for Stuff submits that when these proceedings were issued the parties were talking past one another; from Stuff’s perspective while the material would not be destroyed or returned it was “secured”, in the sense that Stuff would not share it with third parties except pursuant to news activity, whereas Vector considered in this state of affairs the information was not “secured”. He adds Stuff was concerned returning the material to Vector would have compromised the anonymity of its source, and that Stuff only used the data to contact an Auckland-based celebrity in order to verify the accuracy of the information supplied and to seek comment from an affected customer.

[14]   Mr Stewart also emphasises that Vector could have sought informal undertakings before issuing proceedings.

[15]   Finally, he points out that while Stuff did eventually destroy the material, it was only once the Editorial Director had determined the material was no longer necessary to support Stuff’s news activities, and to ensure the identity of the source was not compromised.

[16]   In short, Stuff’s position is the proceedings were unnecessary and as a result Vector should bear its own costs.

Analysis

[17]   This application sits within a band of cases where although the proceeding has not yet been discontinued, the desired outcome has been achieved and it will be discontinued in short order. That is the context within which costs fall to be determined.

[18]   This context has consequences for Vector’s claim. As the Court of Appeal recently confirmed, the “unsuccessful party” is “the party which was adjudged liable to pay money to the other”.7 As noted, there has been no adjudication as a result of Stuff’s undertakings, making it hard to determine success in the usual sense of the word. As a corollary, I do not intend to speculate on the merits; this is not a case where the merits are utterly clear.8

[19]   Vector claims to be the successful party because it has achieved its litigation objective. There is precedent for such a claim. In Carmel College Auckland Ltd v North Shore City Council, the defendant changed its policy after proceedings were initiated and the plaintiff thereafter discontinued.9 Venning J found:10

“While counsel for the respondent is strictly correct that the merits of the plaintiffs' claim have not been determined the practical effect of the subsequent decisions made by the defendant to change its policy and to give the new policy retrospective effect is that the development contribution has been set aside. Given the change in policy the development will not and cannot be the subject of a development contribution. To that extent the practical situation is that the plaintiffs have achieved the result they sought in

7      Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36 at [13].

8      N-Tech Ltd v Abooth Ltd [2012] NZHC 1167 at [99].

9      Carmel College Auckland Ltd v North Shore City Council HC Auckland CIV-2007-404-5894, 20 January 2009.

10 At [19].

issuing the proceedings. So, while the merits of the plaintiffs' challenge to the defendant's policy have not been ruled on by the Court the plaintiffs have achieved what they set out to achieve in issuing the proceedings. The plaintiffs are prima facie entitled to costs as successful parties: r 47. The plaintiffs' claim for costs on a 2B basis is unexceptional.”

[20]He accordingly awarded the plaintiffs costs.

[21]   By contrast in F v Minister of Internal Affairs, where the defendant revoked the decision subject to challenge by judicial review following the issuing of proceedings, Collins J did not consider he had sufficient evidence to conclude the defendant’s decision to revoke was a consequence of the proceeding.11 He ordered cost should lie where they fall. Likewise in Maehl v Auckland Council Whata J did not follow Carmel College Auckland Ltd and ordered costs should lie where they fall, citing the following reasons:12

“First, the predictability afforded by the costs rules is premised on success in the proceedings, not a subjective evaluation of success or failure in terms of a party's objectives. Second, unlike Carmel College Auckland Ltd, the Council in this case does not accept that it erred and has not changed its position. Third, there are many reasons why litigants yield in the face of litigation pressure and forgo their strict legal rights notwithstanding the merits. In my view, this strongly militates against this Court being too ready to award costs when the merits have not been determined by the Court.”

[22]   This is a case where, to adopt Venning J’s phraseology, the practical situation is Vector has achieved the result it sought in issuing the proceedings.

[23]   But it does not flow from that acknowledgment that it is entitled to costs. Rather, I see this situation as more analogous to those faced by Collins and Whata JJ. There is not sufficient evidence to safely conclude on the papers that Stuff’s decision to make undertakings was a consequence of this proceeding being brought. Indeed Mr Stewart’s claim in submissions is that the evidence was only destroyed after a decision in the normal course of newsroom business by the Editorial Director, once he had determined the material was no longer necessary to support Stuff’s news activities, and to ensure the identity of the source was not compromised. As in Maehl and F v Minister of Internal Affairs, Stuff does not concede it has erred and has not resiled

11     F v Minister of Internal Affairs [2013] NZHC 2117 at [17].

12     Maehl v Auckland Council [2017] NZHC 1902 at [43].

from its position. Having not heard evidence on this point I am not in a position to reconcile the competing contentions, and this is not a case where only one logical inference is available.

[24]   I have therefore arrived at the conclusion that costs should lie where they fall. The inference of success which Mr Brown submits I should draw is not available on the facts before me.

Result

[25]Costs are to lie where they fall.

Moore J

Solicitors/Counsel:

Mr Brown QC, Auckland Mr Stewart, Auckland