HealthAlliance NZ Limited v Hewlett-Packard New Zealand [2024] NZHC 842 (18 April 2024)

Last Updated: 21 May 2024

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

CIV-2021-404-1215 [2024] NZHC 842

BETWEEN	HEALTHALLIANCE N.Z. LIMITED Plaintiff/Counterclaim Defendant
AND	HEWLETT-PACKARD NEW ZEALAND First Defendant CAPAX DISCOVERY INC Second Defendant/Counterclaimant ZOVY LLC Third Defendant/Counterclaimant

Hearing:	On the papers
Appearances:	RJ Hollyman KC, DJ Watt and LE Kenner for the Plaintiff/Counterclaim Defendant G Williams, T Huthwaite and B Carey for the Second and Third Defendants/Counterclaimants
Judgment:	18 April 2024

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK [COSTS]

This judgment was delivered by me on 18 April 2024 at 4 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Maberly & Co, Auckland AJ Park, Wellington

HEALTHALLIANCE NZ LTD v HEWLETT-PACKARD NEW ZEALAND [2024] NZHC 842 [18 April 2024]

Introduction

• [1] The second and third defendants, Capax Discovery Inc and Zovy LLC (Capax/Zovy), seek costs on two applications:

(a) for further and better discovery; and

(b) for leave to file an amended counterclaim.

• [2] The discovery application was withdrawn less than a week before the scheduled hearing following the filing of an affidavit by healthAlliance confirming there were no further documents to discover in response to the application and the application for leave was resolved by consent.

• [3] The plaintiff, healthAlliance, opposes costs being awarded to Capax/Zovy for either application and instead seeks wasted costs itself of $3,585 on the discovery application.

• [4] I discuss these costs claims separately below after setting out the relevant costs principles.

Relevant costs principles

• [5] The starting point in any costs decision is that all matters relating to costs are at the discretion of the Court, as set out in r 14.1 of the High Court Rules 2016. The r 14.1 discretion is wide but is generally to be exercised subject to the principles in r 14.2.

• [6] The first principle in r 14.2(1) is that the party who fails should pay costs to the party who succeeds. The Court of Appeal has confirmed that:¹

Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focussing on who initiated what step, and the extent to which that step succeeded or failed.

1. Packing In Ltd (in liq) formerly known as Bond Cargo Ltd v Chilcott [2003] NZCA 124; (2003) 16 PRNZ 869 (CA) at [6]; and see Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Company Ltd [2020] NZHC 932 at [28]–[29].

• [7] Rule 14.7 expressly provides that the court may refuse to make an order for costs or to reduce the costs otherwise payable, including where the party claiming costs, although succeeding overall, has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs, or where some other reason exists which justifies the court refusing or reducing costs, despite the principle that the determination of costs should be predictable and expeditious.²

• [8] Rule 14.8(1) relevantly provides that costs should be addressed immediately following an opposed interlocutory application unless there are special reasons to the contrary.

Costs on further and better discovery application

Background

• [9] Capax/Zovy filed their application for further and better discovery of two categories of documents on 8 August 2023, Hewlett Packard Consolidated Archive (HPCA) system log files and HPCA access and migration documents.

• [10] healthAlliance filed a notice of opposition on 22 August 2023 opposing all orders sought.

• [11] However, on 8 September and 19 October 2023 healthAlliance disclosed certain of the documents requested.

• [12] On 31 October 2023, healthAlliance invited Capax/Zovy to withdraw the application on the basis that they had now provided the documents sought and that Mr Pothan would shortly file a further affidavit formally discovering the audit log results. The letter said that provided the application was withdrawn by 6 November 2023, there would be no issue as to costs.

• [13] On 6 November 2023 Capax/Zovy filed its submissions for the hearing on 20 November 2023, together with an amended application (healthAlliance says without leave).

² High Court Rules 2016, r 14.7(d) and (g).

• [14] On 10 November 2023, a second discovery affidavit by Mr Pothan was filed for healthAlliance providing supplementary discovery of the documents previously disclosed.

• [15] On 13 November 2023, healthAlliance filed its submissions for the scheduled hearing together with a further affidavit by Mr Pothan giving evidence that there were no further documents to discover in response to the application.

• [16] On 14 November 2023, Capax/Zovy filed a memorandum recording that they wished to withdraw the application but seeking costs on the basis that overall Capax/Zovy’s application was both necessary and successful.

• [17] The plaintiffs filed a memorandum in response on 17 November 2023 accepting that the withdrawal was appropriate given that all matters had been dealt with and confirming that the hearing on 20 November 2023 could be vacated.

Should costs be payable?

• [18] healthAlliance submits that costs ought not to be payable because:

(a) Capax/Zovy did not limit its request to audit logs until November 2022 and only provided the instructions necessary to export them on 20 June 2023.

(b) June 2023 was also the first time Capax/Zovy requested certain documents. healthAlliance says it is wrong to claim that healthAlliance ignored Capax/Zovy’s requests for 18 months.

(c) Contrary to Capax/Zovy’s submission, healthAlliance had not refused to provide the second category of documents sought, it had advised Capax that it was searching for the documents.

(d) Even if the application was appropriately filed, the plaintiff provided all of the documents sought in correspondence and in response to

further queries raised by 19 October. healthAlliance then sent a letter on 31 October inviting Capax/Zovy to withdraw the application.

(e) Capax/Zovy did not respond, instead amending its application on 6 November at the same time as it filed submissions in advance of the hearing.

(f) healthAlliance says the amendments were dealt with promptly within a week and the application has now been withdrawn.

• [19] Realistically appraising the end result, it is clear that, although discontinued, Capax/Zovy has succeeded in its application because the documents sought have been provided to the extent they exist.

• [20] healthAlliance refers to the fact that Capax/Zovy did not limit its request to audit logs until November 2022 and only provided the instructions necessary to export them on 20 June 2023.

• [21] Capax/Zovy responds that healthAlliance always had those instructions in its possession and never actually requested instructions, with Capax/Zovy proactively providing them on 20 June 2023.

• [22] Whatever the position, in correspondence between the parties in July 2023, counsel for Capax/Zovy said an application for further and better discovery and for an order facilitating inspection would be made if the requested documents had not been received by 14 July 2023.

• [23] healthAlliance’s lawyers responded saying that if Capax/Zovy considered they needed to file an application for further and better discovery before the end of July, it was of course open to them to do so.

• [24] Capax/Zovy did not file its application until 8 August 2023.

• [25] HealthAlliance filed a notice of opposition on 22 August 2023 opposing all orders sought. As set out above, certain documents were then provided by

healthAlliance on 8 September and 19 October 2023 and healthAlliance sent its letter of 31 October saying the application ought to be withdrawn.

• [26] However, healthAlliance’s 31 October letter records that Mr Pothan would shortly swear a further affidavit, formally discovering the audit log results. The letter concludes that “[p]rovided the application is withdrawn by 6 November 2023, there would be no issue as to costs.”

• [27] Capax/Zovy’s submissions were due on 6 November 2023. By that date the further affidavit of Mr Pothan promised had not been filed. Instead, a second discovery affidavit was filed by Mr Pothan on 10 November 2023 and then a further affidavit on 13 November, filed together with healthAlliance’s submissions for the hearing, deposing that there were no further documents to discover in response to the application.

• [28] The next day, 14 November 2023, counsel for Capax/Zovy filed a memorandum seeking to withdraw the application.

• [29] I consider that Capax/Zovy is therefore entitled to costs on the application. If healthAlliance wished to avoid the application it could have provided the documents prior to the end of July 2023 when it suggested it would, or at least sought extra time if that was necessary.

• [30] There appears to be no basis for any claim by healthAlliance for wasted costs given its letter of 31 October 2023 and the affidavits of Mr Pothan. If healthAlliance wished to avoid the costs of its opposition it could have provided the documents and affidavits prior to 8 August 2023. Furthermore, if it wished to avoid the cost of preparing submissions, Mr Pothan could instead have filed an affidavit immediately following the filing of submissions by Capax/Zovy on 6 November 2023 (at least in draft). This is particularly the case when the plaintiff’s letter dated 31 October 2023 refers to Mr Pothan shortly swearing an affidavit.

Quantum

• [31] Capax/Zovy seek costs on a 2B basis of $11,950.00 plus a filing fee of $95.65 together with a 25 per cent uplift on the basis that healthAlliance contributed unnecessarily to the time and expense of the proceedings, including by failing to comply with the order for standard discovery made on 7 October 2021.

• [32] Capax/Zovy say that lack of action by healthAlliance in responding to the requests for discovery entitles Capax/Zovy to a costs uplift.

• [33] There appears to have been considerable delay in the discovery of documents but in the circumstances of this case, including where the application was withdrawn rather than determined, I do not consider it is appropriate to order an uplift in costs. There has been no determination of the causes of the delay and whether healthAlliance did have access to the instructions for download prior to June 2023 and so forth.

• [34] As far as the items for which costs are claimed, I agree with healthAlliance’s submission that item 12, relating to inspection, is not properly claimable in respect of the application for further discovery. The remainder of the items claimed however are appropriately sought. Deducting the inspection step of $3,585 from the costs claimed reduces the total to $8,365 in costs plus the filing fee disbursement of $95.65 for a total of $8,460.65.

Costs on Capax/Zovy’s application for leave to file amended counterclaim

Background

• [35] Capax/Zovy filed and served an amended counterclaim on 22 December 2023.

• [36] On the same date, healthAlliance emailed the case officer advising that Capax/Zovy’s amended counterclaim would require leave as the close of pleadings date fell on 11 December 2023.

• [37] The pre-trial timetable recorded that the close of pleadings date was 17 weeks prior to the hearing.
• [38] On 10 January 2024, Capax/Zovy advised that, in their view, the close of pleadings was 1 January 2024.

• [39] On 11 January 2024, the case officer informed the parties that in her view the close of pleadings date was in fact 1 December 2023.

• [40] On 12 January 2024, healthAlliance confirmed it agreed with the case officer’s calculation of the close of pleadings date as 1 December 2023.

• [41] Capax/Zovy submits that the Court set a deadline of 23 January 2024 for Capax/Zovy to file the application for leave. The email chain with the case officer attached in Schedule 1 to Capax/Zovy’s memorandum filed with the application on 30 January 2024 includes an email on 10 January 2024 asking Capax/Zovy to file a memorandum seeking leave by 23 January 2024. For the reasons that follow, whether the case officer required an application by 23 January or not does not factor into my decision on the claim for costs so it is unnecessary to make further enquiries with the case officer.

• [42] Counsel for healthAlliance wrote to Capax/Zovy’s counsel on 26 January 2024, asking counsel to set out the reasons why leave ought to be granted. The letter records that once healthAlliance had received Capax/Zovy’s response, counsel would take instructions and it may be that the issue of leave could be resolved without the Court’s further involvement.

• [43] There appears to have been no response to this letter.

• [44] On 30 January 2024 (not by 23 January 2024 if that was in fact requested), Capax/Zovy filed an application for leave to file the amended defence and counterclaim together with a memorandum.

• [45] healthAlliance then filed a memorandum on 5 February 2024 recording that, having now seen the explanation provided in the documents filed, healthAlliance did not oppose the grant of leave. The memorandum recorded that an explanation had not been provided previously.

Submissions

• [46] Capax/Zovy maintains that the correct close of pleadings date was 1 January 2024, exactly 17 weeks prior to the 29 April 2024 hearing date, and that the application was unnecessarily forced by healthAlliance.

• [47] healthAlliance submits in response that Capax/Zovy ought not to be entitled to costs because:

(a) Capax/Zovy did not respond to healthAlliance’s offer to seek to resolve the matter by agreement.

(b) The close of pleadings date has always been 11 December 2023.

(c) healthAlliance disagrees that it should have objected to Capax/Zovy’s calculation of the close of pleadings date in correspondence in October 2023 when Capax/Zovy emailed healthAlliance requesting agreement to amend the timetable to trial as Capax/Zovy had not previously enquired about healthAlliance’s willingness or otherwise to make any timetable changes. healthAlliance replied saying it did not consider any timetable amendments were required and so healthAlliance says there was no reason for it to engage with, or correct the errors contained in, Capax/Zovy’s timetable attached.

(d) Capax/Zovy’s decision to file its amended statement of claim after the close of pleadings, and on the last working day before the Christmas holiday, prevented healthAlliance from considering the amended claims when preparing its evidence-in-chief which was due on 15 January 2024. However, healthAlliance records that it was prepared to endeavour to deal with these matters in later evidence.

(e) Capax/Zovy’s conduct has caused unnecessary cost. Had Capax/Zovy chosen to engage with healthAlliance’s offer of 26 January 2024 to seek to resolve this issue between the parties, the issue could have been

addressed by way of a joint memorandum so that neither party needed to incur the costs of filing and responding to a formal application.

• [48] In my view in terms of costs, the key determining factor is that healthAlliance wrote to Capax/Zovy on 26 January 2024 offering to resolve matters without the need for an application and yet Capax/Zovy appears not to have responded to that correspondence and instead went ahead and filed its application on 30 January 2024.

• [49] There is no need now to determine the correct close of pleadings date. But I do not consider that 1 January 2024 ought sensibly to have been considered to be the close of pleadings date. I accept that the working day definition in r 1.3 of the High Court Rules does not strictly apply because weeks are being used for the calculation of dates for the pre-trial timetable, rather than days. However, if precise dates are being used, a judge would be very unlikely to set a close of pleadings date in the period between 25 December and 15 January unless there were exceptional circumstances. Similarly, if a calculation results in a date falling within the shutdown period, I would expect counsel to discuss and resolve an appropriate date.

• [50] Capax/Zovy submits that if the Court considers that 1 January 2024 could not have been the close of pleadings date because the Court Registry was closed on that day, r 1.18 of the High Court Rules would mean that the close of pleadings date would have been extended to the next date the Registry was open, which in this case was 3 January 2024. However, this approach to calculating dates does not work from a practical perspective. If, for example, the close of pleadings date was calculated apparently to fall on 25 or 24 December and there are only two weeks between that date and the date that the plaintiff must file evidence (as was the position in this case) the close of pleadings and date for exchange of evidence would converge.

• [51] Furthermore, I do not agree with Capax/Zovy’s submission that calculating the close of pleadings as 11 December 2023 is necessarily inconsistent with the plaintiff’s acceptance that the plaintiff’s briefs of evidence were due on 15 January 2024. This latter date is at the outer limit of the shutdown period for the courts and so does not cause the same difficulty.
• [52] In any event, where counsel’s calculation of the close of pleadings date leads to a date such as 1 January 2024 and a party elects to file an amended pleading on the last day that the Court is open prior to that date, without discussion with opposing counsel as to when the close of pleadings date is, then that party runs the risk of any costs claim being declined.

• [53] In the end, however, the failure to respond to healthAlliance’s 26 January 2024 letter and thereby attempt to resolve matters without the need for an application is a sufficient basis on its own for the costs claim to be declined.

• [54] Capax/Zovy’s application for costs in respect of its application for leave to file an amended counterclaim is therefore declined.

Result

• [55] The plaintiff is to pay costs on a 2B basis to the second and third defendants on the application for further and better discovery in the amount of $8,365 in costs plus $95.65 in disbursements for a total of $8,460.65.

• [56] The application by the second and third defendants for costs on their application for leave to file an amended statement of defence and counterclaim is declined.

Associate Judge Sussock