LSG Sky Chefs New Zealand Limited v Pacific Flight Catering Limited HC Auckland CIV-2011-404-000277 [2011] NZHC 423 (14 April 2011)

Last Updated: 17 June 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2011-404-000277}

BETWEEN LSG SKY CHEFS NEW ZEALAND LIMITED

Plaintiff

AND PACIFIC FLIGHT CATERING LIMITED Defendant

Hearing: (On the Papers)

Counsel: R Parmenter for the Plaintiff

R L Towner and T L Clarke for the Defendant

Judgment: 14 April 2011

JUDGMENT OF WOOLFORD J As to costs

This judgment was delivered by me on 14 April 2011 at 3.00pm

Pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

R O Parmenter, PO Box 1052, Shortland Street, Auckland

Garry Pollak & Co Ltd, PO Box 1588, Shortland Street, Auckland 1140

R L Towner and T L Clarke, Bell Gully, PO Box 4199, Auckland 1140. DX CP20509

LSG SKY CHEFS NEW ZEALAND LIMITED V PACIFIC FLIGHT CATERING LIMITED HC AK CIV-2011-

404-000277 14 April 2011

Introduction

[1] The defendant seeks increased or indemnity costs against the plaintiff following my refusal of the plaintiff’s application for an interim injunction.[1] The plaintiff accepts that the defendant is entitled to costs but submits that scale costs only should be awarded.

[2] All matters relating to costs are at the discretion of the Court,[2] although rr 14.2 - 14.10 of the High Court Rules provide guidance. Rule 14.6 deals with increased or indemnity costs:

14.6 Increased costs and indemnity costs

(1) Despite rules 14.2 to 14.5, the court may make an order—

(a) increasing costs otherwise payable under those rules

(increased costs); or

(b) that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).

(2) The court may make the order at any stage of a proceeding and in relation to any step in it.

(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.

Submissions

[3] The defendant seeks indemnity costs on the basis that it can be reasonably inferred that the plaintiff acted vexatiously, frivolously, improperly, and/or unnecessarily in commencing and/or continuing its application. That is because it was aware before it commenced its application for an interim injunction that it would

be receiving from the defendant the right number of fulltime employees, it had received from the defendant information in aggregate form about the transferring employees and it had the opportunity to seek further information (as to the mix of work skills) but it did not do so.

[4] In the alternative, the defendant submits that if the Court is not minded to award indemnity costs, increased costs are appropriate.

[5] Increased costs are sought on the basis the plaintiff contributed unnecessarily to the time or expense of its application for an interim injunction by taking or pursuing an unnecessary step or pursuing an argument that lacked merit. It also submits that there was no serious question to be tried.

[6] As to the classification of the proceedings, the defendant submits that the application should be classified as a 3B proceeding because the legal issues that arose as a result of the plaintiff’s application were novel, complex and significant. It is said that both counsel were very experienced and with specialised skills in employment law.

[7] On the basis of this categorisation, the defendant submits that scale costs on the interlocutory application for an interim injunction would be $7,784. However, the fee charged to the defendant by its counsel was $42,045. This is said to represent

75 percent of the actual time spent on the matter.

[8] On the other hand, the plaintiff submits that it is not open to the defendant to assert that the proceedings should never have been brought and the case turned on a matter of statutory construction. It accepts that the duty of care claim was novel but submits that it was not without merit so as to expose the plaintiff to more than scale costs.

[9] It points to difficulties that arose from an inadequate Act and an obstructive attitude on the part of the defendant. The plaintiff submits that the appropriate classification of the proceedings should be 2B and that there was no need for second counsel.

Discussion

[10] The question of law raised was novel. The case was not just about applying established principles to a new factual situation. The legislation is relatively new and untested. In those circumstances, it was appropriate to have counsel of special skill and experience in employment law arguing the application in the High Court. The appropriate categorisation of the proceedings is therefore 3B.

[11] As noted above, the defendant calculates scale costs at $7,784. However, there is an argument that the defendant is entitled to claim a further two days under Schedule 3 No. 2 for commencement of defence by the defendant which includes receiving instructions, researching facts and law and preparing, filing and serving statement of defence. In an application for an interim injunction, it is necessary for the Court to consider the merits of the substantive claim. This was no different. This would add a further sum of $5560 to bring scale costs up to $13,344.

[12] The plaintiff submits that no allowance should be made for second counsel. The defendant did not make any submissions on the point. However, if allowance was made for second counsel (and the defendant was represented by two counsel) this would add 50 percent to scale costs bringing them up to $20,016.

[13] In those circumstances, it is my view that an appropriate award of costs is

$20,000. This could be considered scale costs with an allowance for second counsel. However, if proper scale costs do not reach $20,000 then I would award the defendant increased costs of $20,000 on the basis that the plaintiff took or pursued an unnecessary step or an argument that lacked merit (r 14.6(3)(b)(ii)).

[14] In that regard, I considered the following factors:

(a) The plaintiff acknowledged that it would be impractical for the defendant’s employees to transfer to the plaintiff ’s employment on a part-time basis, yet that is precisely what the plaintiff sought in its application for interim orders.

(b) The cause of action (negligence) relied on was novel, at odds with commonsense and not self-evident.

[15] I would also rely on r 14.6(3)(d) in that the relief sought of restarting the statutory process carried a significantly higher threshold than a normal restraining order. The plaintiff was quite unable to reach that threshold and all the circumstances favoured continuation of the statutory process.

Result/Orders

[16] Costs of $20,000 plus disbursements, to be fixed if necessary by the

_{Registrar, are to be paid by the plaintiff to the defendant.}

Woolford J

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[1] _{Judgment dated 14 February 2011.}
[2] High Court Rules, r 14.1.