Woolley v Fonterra Co-Operative Group Limited
[2019] NZHC 86
•5 February 2019
IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WAIHARAKEKE ROHE
CIV-2018-406-000014
[2019] NZHC 86
BETWEEN PHILIP JOHN WOOLLEY
Plaintiff
AND
FONTERRA CO-OPERATIVE GROUP LIMITED
Defendant
Hearing: 28 November 2018 (Judgment: 17 December 2018) Appearances:
H Rennie QC and M A Robertson for Plaintiff M D Branch and K F Shaw for Defendant
Judgment:
5 February 2019
COSTS JUDGMENT OF ASSOCIATE JUDGE MATTHEWS
[1] On 17 December 2018, the Court issued a judgment dismissing the defendant’s application for summary judgment against the plaintiff. Costs were reserved. Memoranda have now been received.
[2] Mr Woolley seeks costs, payable now. He seeks costs on a 2B basis up until 20 July 2018, and on an indemnity basis for steps taken after that date. The reason for this is that on that date Mr Woolley through his solicitors sent an email to the solicitors for Fonterra in which they advised that in their view the application for summary judgment could not succeed and that if Fonterra continued with the application and failed, Mr Woolley would seek an order for solicitor and client costs. On the other hand, if the application were withdrawn then, it would seek costs on scale.
[3] Mr Rennie for Mr Woolley says that as Fonterra has failed, it should pay costs notwithstanding the ordinary rule that on a plaintiff’s application for summary
WOOLLEY v FONTERRA CO-OPERATIVE GROUP LTD [2019] NZHC 86 [5 February 2019]
judgment costs should generally be reserved.1 Mr Rennie notes that in other cases of applications for summary judgments by defendants it has been recognised that it may be appropriate to award costs at the time. He submits that the application could not have succeeded, and this was clearly articulated in the notice of opposition.
[4] For Fonterra, Mr Branch says that Fonterra’s application for summary judgment failed on the basis of an implied term found by the Court to be arguable, and thus the plaintiff has had an indulgence, in that no implied term is in fact pleaded. He says that the email relied on by Mr Rennie does not constitute a Calderbank offer, so the principles relating to Calderbank offers do not apply. He does acknowledge, however, that where a defendant applies for summary judgment the principle that costs are normally reserved is not applied, as in the case of applications by plaintiffs. Nonetheless, he says the Court may take into account whether or not it is premature to resolve the issue of costs in the particular circumstances of the case. He notes, however, that where the courts find that a defendant is able to assess the strength of the case before making an application for summary judgment costs are normally awarded against the unsuccessful defendant.2
[5] Mr Branch says, accurately, that the issue before the Court was essentially what was required before the suspension of Mr Woolley’s supply contract had to be lifted, “and that was found to be an implied term of reasonableness”. He says the Court then went on to find that there were facts, whether disputed or otherwise, that would arguably amount to a breach of what he sees as an implied term. He says neither the implied term or the alleged breaches were pleaded. He says Mr Woolley should have pleaded the interpretation of the contract on which he relied, as required by r 5.19(3) and whilst he accepts that this issue is referred to in the notice of opposition, he says this document is not a pleading. He levels some criticism at Mr Woolley for not filing an amended statement of claim specifically pleading an implied term of reasonableness.
1 NZI v Philpott [1990] NZLR 403.
2 Nand v Tower Insurance [2016] NZHC 1455; Campbell v Thomson [2016] NZHC 96.
Discussion
Should costs be ordered and paid now?
[6] The Court found against Fonterra on this application on two principal grounds. First it rejected Mr Branch’s argument that there was no contractual obligation to lift the suspension as a matter of contractual interpretation.3 This issue was squarely raised in the notice of opposition.
[7] Secondly, the Court accepted the argument of Mr Rennie that the decision by Fonterra on whether to lift its suspension was a matter on which a discretion had to be exercised, and that discretion was to be exercised on the basis of the established principles which apply in that circumstance. This was fully discussed in the judgment.4 Although in his submissions on costs Mr Branch now describes this as an implied term, and one which was not pleaded, notably Mr Branch presented submissions on this very point at the substantive hearing. In paragraph 11 of his written submissions, on which he elaborated in oral submissions, he said “It is accepted, in considering whether to lift the suspension, there is likely to be a reasonableness requirement on Fonterra”. He noted that this was the test for unreasonableness which is described in the judgment. He did, however, say that this obligation was not presently pleaded.
[8] However, the notice of opposition is clear on this point. One of the grounds of opposition states:5
The defendant did not act reasonably or in accordance with its statutory or contractual obligations in refusing to collect milk from the Glenmae Farm from 5 September 2014 and throughout the 2014/2015 milking seasons.
[9] Therefore by the time the notice of opposition had been served Fonterra was well aware that the question of the reasonableness of its actions was a live issue on the application for summary judgment, and it presented its submissions accordingly. It does not avail Fonterra’s case to say that the issue of reasonableness was not pleaded in the statement of claim; the application for summary judgment was made by Fonterra
3 Woolley v Fonterra Co-Operative Group Ltd [2018] NZHC 3352 at [20] – [22].
4 At paragraphs [24] – [26].
5 At paragraph 3(d)(viii).
and met by a notice of opposition which clearly set out the position which Fonterra was required to meet on its application. That is the purpose of a notice of opposition.
[10] I find that by the time Fonterra had been served with Mr Woolley’s notice of opposition it was squarely on notice that this issue would be argued. Further, review of the judgment makes it clear that the question of reasonableness was to be assessed in light of the evidence, and the evidence for Fonterra as well as that for Mr Woolley plainly raised the very reasons for which the Court found it to be arguable that Fonterra did not act reasonably. The evidence, submissions and the Court’s conclusions are set out at paragraphs [26] – [42].
[11] In my opinion proper consideration of the case it would meet on its application for summary judgment, as disclosed on the documents filed not only for Mr Woolley but also for Fonterra itself, should have made it abundantly clear to Fonterra that the case was not appropriate for a summary judgment application, even if it was at the time it was filed, a point to which I now turn.
[12] The question of whether Fonterra was or was not in breach of the supply agreement was squarely raised in the statement of claim. The application for summary judgment by Fonterra which followed simply stated that the cause of action in Mr Woolley’s claim could not succeed (without giving reasons) and otherwise relied on the affidavit of Ms A J Brewer Shearer whose evidence is referred to in detail in the substantive judgment. It is that evidence which itself demonstrated Fonterra’s reliance on the position of the Marlborough District Council. It was Ms Brewer Shearer who was substantially engaged in the events which preceded Fonterra’s decision not to recommence collection of Mr Woolley’s milk, and its ongoing refusal to do so throughout the season. Plainly her evidence was, and remains, crucial to Fonterra’s position, yet that evidence itself establishes Fonterra’s reliance on the decision of another party, instead of itself making an independent decision, which arguably breaches the standard of reasonableness imposed on Fonterra in making this decision, by the cases referred to.
[13] Thus, even on briefing Ms Brewer Shearer’s evidence for the purposes of this case, it should have been plain that it was arguable that Fonterra did not act reasonably,
and that establishing the issue of reasonableness would require assessment of evidence at trial. It follows that it is strongly arguable that the application for summary judgment should not have been brought in the first place.
[14] I reject the argument that Mr Woolley has received an indulgence from the Court. Fonterra was in a position to assess the strength of its application before it filed it, and again on receiving the notice of opposition. I find it appropriate to award costs against Fonterra on its application for summary judgment, now.
Quantum
Costs to 20 July 2018
[15] Mr Rennie seeks costs for the period to 20 July 2018 on a 2C basis. I agree that the proceeding is a Category 2 case, categorisation being made by reference to the case itself and not to the experience of counsel engaged to conduct the case. I also agree that costs on this application should be in Band C under r 14.5 of the High Court Rules, as I consider that a comparatively large amount of time will have been required in relation to this application. This is evident, in my view, from a review of the documents (Fonterra served an affidavit from Ms Brewer Shearer which is 556 pages long, including exhibits referred to by her) and also from the submissions filed for Mr Woolley which were extensive and comprehensive. The context for these documents is an application to dispose summarily of a complex multi-million dollar claim and in my view, despite the fact that for the reasons I have already given the application should not have been brought, a comprehensive response to it was justified.
[16]Scale costs will therefore be awarded on a 2C basis.
Costs from 20 July 2018
[17] Mr Rennie seeks indemnity costs for this period. By r 14.6 the Court may award increased or indemnity costs. Indemnity costs may be ordered in specified circumstances. The circumstance to be considered in this case is “where a party has
acted vexatiously, frivolously, improperly or unnecessarily in commencing, continuing or defending a proceeding or a step in a proceeding”.
[18] Mr Rennie says that Fonterra’s application had no prospect of success. For the reasons I have set out, I agree. In my view Fonterra acted unnecessarily in bringing this application. It put Mr Woolley to considerable unnecessary expense defending it when it knew that the discretion it held in relation to its actions under the supply agreement had to be exercised reasonably, and its own witness provided information recorded in the affidavit filed in support of the application, which amply demonstrated that at least arguably it did not act reasonably. At trial, of course, it might eventually be proved that Fonterra did act reasonably and the judgment records factors supporting Fonterra’s position which a Court at trial will take into account, as well as those relied on by the Court on this application to find an arguable case that its conduct was unreasonable. That, too, amply demonstrates that examination of Fonterra’s conduct in all the circumstances of the case is a fundamental requirement for a finding of a Court on whether its actions were reasonable. To bring an application where it must be shown that the plaintiff cannot succeed was in this case unreasonable and unnecessary, as it should have been clear to Fonterra that scrutiny of the relevant facts at trial would be necessary in order for a Court to achieve a just result.
[19] I therefore find that the Court should approach an assessment of costs for the period after 20 July 2018 by reference to the actual costs incurred as disclosed in Mr Rennie’s memorandum. In this respect I am satisfied that the fees charged by senior counsel were fair and reasonable. However, in addition to those charges the fees for junior counsel and instructing solicitor amount to some $30,000. In awarding indemnity costs the Court must still be satisfied that the costs incurred are reasonable. Although I do not have information before me to conduct an empirical assessment, I have formed the view that the sum to be awarded for this period should be assessed as the fees of senior counsel together with the sum of $20,000.
[20]The disbursements claimed are reasonable.
[21] Accordingly I direct that Fonterra will pay to Mr Woolley costs and disbursements as follows:
Pre 20 July 2018 $4,460.00 Fees of senior counsel
$15,847.00
Fees of junior counsel and Instructing solicitors $20,000.00
Disbursements $1,280.38 $41,587.38
J G Matthews Associate Judge
Solicitors:
Wiseheart Macnab & Partners, Blenheim Harkness Henry, Hamilton
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