Oxygen Air Limited v LG Electronics Australia Pty Limited [2019] NZHC 759 (9 April 2019)

Last Updated: 12 April 2019

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2015-404-2184 [2019] NZHC 759

BETWEEN	OXYGEN AIR LIMITED Plaintiff
AND	LG ELECTRONICS AUSTRALIA PTY LIMITED Defendant

Hearing:	On the papers
Appearances:	M C Black for Plaintiff R J Hollyman & T D Mahood for Defendant
Judgment:	9 April 2019

JUDGMENT OF PAUL DAVISON J

[Re Costs]

This judgment was delivered by me on 9 April 2019 at 3:30 pm Pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Craig Griffin & Lord, Auckland Hudson Gavin Martin, Auckland

OXYGEN AIR LTD v LG ELECTRONICS AUSTRALIA PTY LTD [2019] NZHC 759 [9 April 2019]

Background

[1] Oxygen Air Ltd (Oxygen Air), initiated proceedings against LG Electronics Australia Pty Ltd (LG) in September 2015 for breach of a supply and distribution agreement entered into between the two parties in February 2010.

[2] LG subsequently applied to the High Court for an order that Oxygen Air provide security for costs of $112,594.95 under r 5.45 High Court Rules 2016. At the end of the interlocutory hearing of 4 May 2018, Associate Judge Bell made an order for Oxygen Air to provide security.¹ The terms of the security were clarified by a Minute issued by Associate Judge Bell on 11 May 2018, requiring that Mr Rotteveel, the director and sole shareholder of Oxygen Air, would undertake to answer for any costs awarded against Oxygen Air if it was unsuccessful in its claim.

[3] In the same Minute of 11 May 2018, Associate Judge Bell awarded costs of
$18,340 to LG for its successful application for security for costs, on a mixed 2B/2C basis.

[4] Oxygen Air applied for a review of that decision. On 25 September 2018 I quashed the order requiring Mr Rotteveel to give the personal undertaking.² I also substituted the amount of security Oxygen Air was required to provide, ordering that it pay the sum of $65,000 into Court by 5.00pm on Friday 12 October 2018. Leave was reserved to LG for a stay of the Oxygen Air claim, if Oxygen Air failed to make this payment.

[5] I held that costs on the two hearings were reserved to be determined following receipt of costs memoranda from the parties.

Oxygen Air Submissions on Costs

[6] Counsel for Oxygen Air seeks costs totalling $19,401. This is calculated on a 2B basis in relation to the 4 May 2018 security application, the 11 May 2018 directions hearing and the 2 July 2018 review application. Counsel for Oxygen Air submits:

¹ Oxygen Air Ltd v LG Electronics Australia Pty Ltd [2018] NZHC 945.

² Oxygen Air Ltd v LG Electronics Australia Pty Ltd [2018] NZHC 2504.

(a) The security for costs Oxygen Air was ultimately ordered to pay has been set at a far lower quantum than LG was seeking and was ordered by Associate Judge Bell.

(b) Even before LG had made an application for security, Oxygen Air made a Calderbank offer to provide security in the sum of $50,000. Oxygen Air submits that this offer was realistic, and also that it is within range of the court’s eventual order of $65,000.

(c) Counsel for Oxygen Air submits that if LG had reasonably considered the offer, the ongoing procedural disputes could have been avoided. However, LG’s response to the offer of security was to propose that Oxygen Air pay $80,000 as security, while also reserving the right to apply for additional security.

(d) The costs fixed by Associate Judge Bell against Oxygen Air of $18,340, for the 4 May 2018 hearing, should be discharged as the original order should not have been made.

LG Submissions on Costs

[7] Counsel for LG seeks costs totalling $25,625. This comprises the $18,340 for the 4 May 2018 security application on a mixed 2B/2C basis as awarded by Associate Judge Bell, and a further $6,913 on a 2B basis for the review application, and disbursements. Counsel for LG submits:

(a) LG was successful on each application, because Oxygen Air’s position on both applications was that security should not be ordered. In the alternative, LG submits that both parties in the review application had some measure of success so the costs for that application should lie where they fall.

(b) Neither party made a Calderbank offer greater than the eventual security for costs order, and on balance they are neutral and should be set aside.
(c) No other factors warrant a departure from the general principle contained in High Court Rules 2016, r 14.2(1)(a), namely that the party who fails with respect to a proceeding or an interlocutory application should pay the costs of the party who succeeds.

(d) On the security application, the mixed 2B/2C basis was accepted by Associate Judge Bell because of the large volume of material involved. Oxygen Air filed an extra 115 pages of evidence with its submissions on the basis that LG had raised new matters in its evidence, which LG refutes.

(e) Counsel for LG refutes Oxygen Air’s suggestion that the 11 May directions hearing should be factored into the award of costs, saying they should lie where they fall. However, if costs associated with this hearing were to be considered, counsel for LG submits that they should be awarded costs of $1,561.

Analysis

Review application

[8] Both parties had a measure of success before me on the review application. Oxygen Air succeeded in overturning the order requiring Mr Rotteveel to provide an undertaking that he personally answer for any costs awarded against Oxygen Air if it was unsuccessful in its claim. LG was also successful in that, although the quantum of security was reduced, Oxygen Air was still ordered to pay security for costs of
$65,000.

[9] The primary principle applicable to costs is that the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds.³ In the present circumstances neither party achieved outright or substantial success, and in my view both parties had a broadly equal measure of success. While the outcome sought by LG, that the order requiring Oxygen Air to pay security for

³ High Court Rules 2016, r 14.2(1)(a).

costs, has been upheld on review, I consider that Oxygen Air was fully justified in bringing the application for review, in order to seek removal of the order requiring Mr Rotteveel to meet any costs award, as imposed by Associate Judge Bell.

[10] In the circumstances, and considering the respective amounts of costs sought by both parties in relation to the review, I consider that costs on the review should lie where they fall.

The security for costs hearing

[11] Rule 14.11(4)(b) of the High Court Rules 2016 provides that the Court may take into account a Calderbank offer, if that offer is close to the value or benefit of the judgment obtained by the successful party.

[12] Here, prior to LG making an application for security, Oxygen Air offered to provide $50,000 by way of security, to be paid in two instalments prior to the close of pleadings date. In response, LG requested Oxygen Air to pay security of $80,000 with payment to be made prior to the setting down date.

[13] The proposals made by both parties allowed for LG to apply at a later date for additional security for costs. LG’s offer also required Oxygen Air to agree that if LG’s costs increased, and it decided to seek further security, it would be able to rely upon its expended costs to that date in support of its application.

[14] The amount of security I awarded was $65,000, being the mid-point between the two figures proposed by each party. I do not consider that the requirement LG sought to impose upon Oxygen Air, that it could rely on expended costs in any future application, means that Oxygen Air’s offer is to be regarded as being closer to the result of the judgment.

[15] Accordingly I put both offers aside.

[16] Costs ordinarily follow the event. LG was successful at the review and before Associate Judge Bell in securing an order for security for costs. In both the security
application and the review, Oxygen Air’s stance was that no security should be ordered. LG is therefore entitled to costs on the security application.

[17] While the quantum of security I ordered against Oxygen Air was significantly lower than that sought by LG, and as awarded by Associate Judge Bell, I do not consider that to preclude awarding costs to LG in the circumstances. LG was the successful party.

[18] Associate Judge Bell ordered costs in the amount of $18,340. That was on a mixed 2B/2C basis, with the steps of filing the interlocutory application; preparing written submissions and preparing the bundle for the hearing being categorised as band
C. The Judge accepted that band C was appropriate for those listed steps, noting and accepting Junior counsel for LG’s explanation that considerably more time was in fact spent, than the time allowed for, even under band C.

[19] LG argued in support of Judge Bell’s mixed costs award on two grounds. The first was that the common bundle was exceptionally large at over 1200 pages, with Oxygen Air belatedly filing an extra round of evidence, totalling 115 pages (without leave) at the same time as filing its submissions.

[20] Secondly, the extra evidence filed by Oxygen Air required counsel for LG to spend additional time reviewing that material and preparing additional submissions in reply.

[21] Oxygen Air disputes the appropriateness of 2C costs for those steps. First, it submits that approximately 350 pages in the bundle were unnecessarily included by LG and comprised of irrelevant correspondence passing between the parties’ solicitors. Second, Oxygen Air submits that the evidence it introduced by way of affidavits, was relevant and appropriately introduced.

[22] In my view Associate Judge Bell’s costs award should stand. The Associate Judge had spent the previous 18 months case managing the proceeding, and was therefore familiar with the matter, including the steps taken by the parties and costs expended in connection with the security for costs application. Costs are ultimately at
the discretion of the Judge who awards them, and where the validity of an award of costs to the successful party has been upheld, it is generally inappropriate to depart from the quantum ordered unless the costs decision was clearly wrong. I do not consider that to be the case here.

11 May 2018 directions hearing

[23] As to the 11 May 2018 directions hearing, the Minute of Associate Judge Bell released that same day shows that the directions hearing covered matters such as applications by both parties for further particulars; an application by LG for discovery, which was provided; and the determination of costs on the security application.

[24] I agree with LG that no costs should be awarded in respect of the directions hearing held before Associate Judge Bell on 11 May 2018.

Result

[25] LG is entitled to recover costs on the security application totalling $18,340, inclusive of disbursements of $500.

[26] Costs on the review application are to lie where they fall.

[27] Costs on the 11 May 2018 directions hearing are to lie where they fall.





Paul Davison J