Watson & Son Limited v Active Manuka Honey Association Incorporated no.3 HC Hamilton CIV 2008-419-1495
[2010] NZHC 245
•16 March 2010
IN THE HIGH COURT OF NEW ZEALAND
HAMILTON REGISTRY
CIV 2008-419-1495
BETWEEN WATSON & SON LIMITED
Plaintiff
ANDACTIVE MANUKA HONEY ASSOCIATION INCORPORATED First Defendant
ANDGOLDEN HILLS NEW ZEALAND LIMITED
Second Defendant
ANDCOMVITA NEW ZEALAND LIMITED Third Defendant
ANDHONEY NEW ZEALAND (INTERNATIONAL) LIMITED Fourth Defendant
Hearing: (on the papers)
Counsel: K A van Houtte for Plaintiff
M S King for Third Defendant
M Pascariu for Fourth Defendant
Judgment: 16 March 2010
JUDGMENT (NO. 3) OF HEATH J
This judgment was delivered by me on 16 March 2010 at 10.30am pursuant to Rule 11.5 of the High
Court Rules
Registrar/Deputy Registrar
Solicitors:
Kensington Swan, Private Bag 92101, AucklandSharp Tudhope, Private Bag 12020, Tauranga
Minter Ellison Rudd Watts, PO Box 3798, Auckland
WATSON & SON LIMITED V ACTIVE MANUKA HONEY ASSOCIATION INCORPORATED AND ORS
HC HAM CIV 2008-419-1495 16 March 2010
Applications for costs
[1] Comvita New Zealand Ltd (Comvita NZ) and Honey New Zealand (International) Ltd (Honey New Zealand) seek costs. Both parties successfully applied to be struck out of the present proceedings. The applications were referred to me last week, for determination on the papers.
[2] There is no dispute that Watson & Son Ltd (Watson) should pay some costs
to each defendant. The question is whether scale, increased or indemnity costs ought
to be ordered.
[3] The background to the proceeding is set out in my judgment of 29 September
2009, on Comvita NZ’s application to strike out the claim.[1] I adopt that summary of
the background.
[1] Watson & Son Ltd v Active Manuka Honey Association Incorporated (High Court Hamilton, CIV
2008-419-1495, 29 September 2009) at paras [2]-[21].
[4] An application to strike out Honey New Zealand was resolved by consent, without the need for any appearance. An order to that effect was made by Keane J,
on 18 November 2009. In terms of the Judge’s directions, memoranda on costs have now been filed and served.
[5] I deal with each application in turn.
Comvita NZ’s claim for costs
[6] Mr King, for Comvita NZ, seeks indemnity or increased costs. If neither were awarded, he submits that costs should be awarded on a 2C basis. The actual costs incurred by Comvita NZ total $63,485.50, plus GST and disbursements.
[7] Comvita NZ’s position is that Watson joined it improperly in “a desperate attempt to avoid payment of an undisputed debt of approximately $300,000 which
was the subject of a statutory demand” issued by Comvita NZ. The claim was struck
out on the basis of no tenable pleading, from which it could be inferred that Comvita
NZ was liable.
[8] Because Watson’s application to set aside the statutory demand was pending, there was a need for urgency to deal with the strike out application. That resulted in hearings on 13 August and 22 September 2009. On the first of those occasions, I adjourned the application to provide a final opportunity for Watson to plead its best case against Comvita NZ.
[9] For Watson, Ms van Houtte submits that the appropriate order for costs should be a 2B basis, submitting that the proceedings were of “average complexity”
for the purposes of that category and band. She submits there are no circumstances justifying either increased or indemnity costs.
[10] The circumstances in which either increased or indemnity costs may be ordered are set out in r 14.6(3) and (4) of the High Court Rules:
14.6 Increased costs and indemnity costs
...
(3) The court may order a party to pay increased costs if—
(a) the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
(i) failing to comply with these rules or with a direction of the court; or
(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or
(c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or
(d) 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.
(4) The court may order a party to pay indemnity costs if—
(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding
or a step in a proceeding; or
(b) the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or
(c) costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or
(d) the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to
it; or
(e) the party claiming costs is entitled to indemnity costs under
a contract or deed; or
(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination
of costs should be predictable and expeditious.
[11] Having traced the development of Watson’s causes of action, I held that the proceedings had been brought for a collateral purpose, namely to prevent Comvita NZ from enforcing payment of a debt otherwise due and owing to it:
[55] When the paucity of primary facts alleged to prove agency is taken together with the attempts, over a period of only three months, to find a way
in which a claim could be brought against Comvita NZ, the bona fides of
Watson’s claim can be justifiably questioned. The proximity of joinder to the hearing of applications to set aside statutory demands and the way in which the claims have varied through their three iterations suggests to me that the claims have not been brought for genuine purposes. The present claims have all the hallmarks of an attempt to defeat the statutory demand.
On that basis, I cannot accept the submission of counsel for Watson that the proceeding was issued in good faith.
[12] Indemnity costs are directed to a situation in which a party is guilty of flagrant misconduct.[2] While I take the view that the proceeding was prosecuted for
an ulterior purpose, I do not consider it was brought in wilful disregard of known facts or clearly established law. On the best view of Watson’s position, there was some justification for issuing the proceeding but little for continuing beyond the adjournment granted on 13 August 2009 for its best case to be advanced.
[2] Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400 (CA) at [27]-[29]. See r 14.6(3), set out at para [10] above.
[13] In those circumstances, I consider increased costs are justified but not indemnity costs. Increased costs are designed to address a situation in which there is failure by the losing party to act reasonably.[3] That is the category into which I put Watson’s actions, in relation to its dispute with Comvita NZ. Increased costs need to reflect the continuum to which I have already referred.
[3] Ibid at para [27]: See r 14.6(4), set out at para [10] above.
[14] This proceeding, so far as Comvita NZ was concerned, would ordinarily justify costs on a 2B basis. In my view, an appropriate order is to require Watson to meet the costs of Comvita NZ on a 2B basis, with an uplift of 50% to recognise Watson’s unreasonable prosecution of its claim. Reasonable disbursements are also ordered.
Claim for costs by Honey New Zealand
[15] Mr Pascariu, for Honey New Zealand, seeks costs on a 2C basis, with an uplift to reflect unreasonable conduct on the part of Watson. In Honey New Zealand’s case, it had been involved in extensive litigation. Watson’s application for an interim injunction was dismissed by Wild J, on 30 July 2009. Wild J awarded 3C
costs against Watson on that interim injunction application.
[16] No submissions have been filed by Watson on Honey New Zealand’s application for costs.
[17] By consenting to the strike out application, Watson have acknowledged that
its claim cannot be pursued against Honey New Zealand. Honey New Zealand have been dragged into unwanted litigation and had significant costs thrown upon them.
As a result, I consider that costs on a 2C basis, plus disbursements reflect adequately the nature of the litigation and the costs incurred by Honey New Zealand.
Result
[18] Costs are awarded in favour of Comvita NZ on a 2B basis, with an uplift of
50%, together with reasonable disbursements. Those costs and disbursements shall
be fixed by the Registrar, by reference to the information provided by Comvita NZ
in counsel’s memoranda.
[19] In respect of proceedings that post-date Wild J’s order for costs, costs are awarded in favour of Honey New Zealand on a 2C basis, together with reasonable disbursements. Those costs and disbursements shall also be fixed by the Registrar, having regard to information provided by counsel for Honey New Zealand.
P R Heath J
Delivered at 10.30am on 16 March 2010
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