Clorax New Zealand Limited v McPherson's Consumer Products (NZ) Limited [2014] NZHC 1052 (19 May 2014)

Last Updated: 27 June 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-004771 [2014] NZHC 1052

UNDER	The Fair Trading Act 1986
BETWEEN	CLOROX NEW ZEALAND LIMITED Plaintiff
AND	McPHERSON'S CONSUMER PRODUCTS (NZ) LIMITED Defendant

Hearing:	On the papers
Counsel:	P Moodley for the Plaintiff A W Johnson for the Defendant
Judgment:	19 May 2014

_{COSTS JUDGMENT OF GILBERT J}

CLOROX NZ LTD v McPHERSON'S CONSUMER PRODUCTS (NZ) LTD [2014] NZHC 1052 [19 May 2014]

Introduction

[1] This judgment deals with the issue of costs following the plaintiff’s discontinuance of its claim. The plaintiff claims that it is entitled to costs because it effectively succeeded in obtaining the relief it sought in the proceeding. The defendant contends that costs should lie where they fall.

Background

[2] The plaintiff distributes Mono® and Rota® brand foils in New Zealand. The defendant distributes Multix brand foils. The plaintiff issued the present proceeding on 5 November 2013 seeking a permanent injunction restraining the defendant from claiming, as it was doing on its packaging and other advertising materials, that its foil is “stronger than ordinary foil”. The plaintiff claimed that any such statement breached ss 9 and 13 of the Fair Trading Act 1986. The only other relief sought by the plaintiff was an order for costs.

[3] The plaintiff discontinued the proceeding, but only after the defendant advised on 31 January 2014 that it had changed its packaging by removing the “stronger than ordinary foil” claim and replacing it with the claim that its foil was “strong and reliable”. The process of replenishing all retail stocks with the new product packaging was completed by 18 March 2014. On that date, the defendant provided an undertaking to the plaintiff’s solicitors in the following terms:

We confirm our client has now completed the roll out of its new packaging for foil in New Zealand.

As a result of the above (and despite having no legal obligation to do so), McPhersons Consumer Products (NZ) Limited now undertakes that it, by its servants and agents, will not in New Zealand, advertise, offer for sale, sell or distribute any of its products in conjunction with the use of the statement “Stronger Than Ordinary Foil”.

Having regard to the above, there is no purpose in the proceedings continuing. We suggest that a discontinuance now be filed.

Analysis

[4] The usual rule is that a plaintiff who discontinues its claim is liable to pay the defendant’s costs.¹ However, this is subject to the Court’s overriding discretion as to costs. In cases where it is clear that a defendant has capitulated and the plaintiff has succeeded in obtaining the relief it sought in the proceeding, there is no reason why the plaintiff should not be entitled to costs in accordance with the normal rule that the successful party is entitled to costs.

[5] I am satisfied that this is the position here. As a result of issuing the proceedings, the plaintiff obtained an undertaking from the defendant in the terms sought. This undertaking is equivalent to a permanent injunction. It was not until after the proceedings were issued that the defendant arranged for tests to be carried out to see whether it could maintain its claim that its foil was stronger than others. Its solicitors wrote to the plaintiff’s solicitors after these tests were completed and advised:

Our client’s testing indicates that the quality of our client’s products is in fact comparable with your client’s product and [another] product ...

[6] Plainly, this testing did not support the defendant’s claim. The defendant proposed that further testing be conducted on a joint basis. The plaintiff rejected that approach, as it was entitled to do. While the defendant did not formally concede any breach of the Fair Trading Act, its decision to change its advertising was the only reasonable course in the circumstances. I consider that this is a case in which it can safely be said that the plaintiff has succeeded with its claim and is entitled to an award of costs.

Result

_{[7] The plaintiff is entitled to the costs of this proceeding on a 2B basis.}

_{M A Gilbert J}

¹ Rule 15.23 of the High Court Rules.