HUMAN RESOURCES INSTITUTE OF NEW ZEALAND INCORPORATED V ELEPHANT TRAINING AND HR LIMITED AND ORS [2016] NZCA 347

HUMAN RESOURCES INSTITUTE OF NEW ZEALAND INCORPORATED V ELEPHANT TRAINING AND HR LIMITED AND ORS [2016] NZCA 347 [20 July 2016]IN THE COURT OF APPEAL OF NEW ZEALANDCA636/2015[2016] NZCA 347BETWEEN HUMAN RESOURCES INSTITUTE OFNEW ZEALAND INCORPORATEDAppellantAND ELEPHANT TRAINING AND HRLIMITED AND ORSRespondentsCourt: Harrison, Stevens and Kós JJCounsel: C J Griggs for the AppellantS C Dench for the RespondentsJudgment:(On the papers)20 July 2016 at 10.30 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant is ordered to pay the respondent's costs for a standard appeal on a 2B basis together with usual disbursements.____________________________________________________________________REASONS(Given by Harrison J)Introduction[1] Human Resources Institute of New Zealand Inc (HRI) issued a proceeding in the High Court against the respondents, Elephant Training and HRI Ltd and associated persons (collectively Elephant). Within six months HRI applied for leave to discontinue and for costs. Courtney J upheld the application to the extent of ordering Elephant to pay HRI's costs on a 2B basis for steps taken before anominated date (9 October 2014).1 However, she ordered HRI to pay Elephant'scosts for steps taken after that date. HRI now appeals on the ground that the Judge erred in failing to order Elephant to pay all its costs throughout the relevant period.[2] The amount at issue is less than $10,000. The appeal does not raise any issues of principle. Counsels' submissions sought to revisit the background facts for the apparent purpose of persuading us to determine the appeal as if it was a rehearing on its merits. However, in order to succeed HRI must establish that Courtney J erred in exercising her statutory discretion on a matter of costs. This Court's reluctance tointerfere in costs awards is well settled. HRI must establish that the decision under appeal is contrary to principle or plainly wrong.Facts[3] HRI is a voluntary professional organisation for representatives in the human resources industry. Elephant is a human resources company. Fraser and Angela Atkins are its shareholders and directors and Lisa Hunter was an employee.[4] HRI filed its proceeding in September 2014 claiming that Elephant had breached the Fair Trading Act 1986 or passed off its property. The company sought interim and permanent injunctions, an account of profits and costs. At issue wasElephant's intention to form an association for human resources professionals to compete with HRI. Elephant proposed to use the name "Chartered HumanResources Institute" which HRI claimed as its own.[5] Elephant filed a statement of defence. But within 10 days of the proceeding being filed Elephant agreed to desist from its proposed course of conduct. On 27 February 2015 Muir J recorded Elephant's undertakings not to use the words complained of or any similarly misleading words. On that basis, HRI agreed not to pursue its application for interim relief. Costs were reserved.1 Human Resources Institute of New Zealand Inc v Elephant Training and HR Ltd [2015] NZHC 2636.[6] The parties attempted to resolve liability for costs between themselves, both before and after the hearing on 27 February. Proposals and counter proposals were exchanged. They did not lead anywhere.[7] On 28 April 2015 HRI applied for leave to discontinue the proceeding in view of Elephant's undertaking. Its supporting application for costs traversed the background history at considerable length. Its objective was to satisfy the Court that HRI acted reasonably in issuing the proceeding, given Elephant's allegedprevarication and a lack of cooperation in circumstances where its intention to conduct itself unlawfully was obvious. Elephant defended HRI's costs application on the basis that its originating claim was without merit. It asserted the proceeding was issued when there was no real risk of unlawful conduct.[8] HRI sought costs according to Schedule 3 of $16,616 together with disbursements of $3,129. In the alternative, increased costs were sought. HRI alleged that Elephant had failed without reasonable justification to accept more than one offer of settlement and had adopted "an unnecessarily bellicose approach to the resolution of this dispute".High Court[9] HRI's application was governed by r 15.23 of the High Court Rules which provides:Unless the defendant otherwise agrees or the Court otherwise orders, a plaintiff who discontinues a proceeding against the defendant must pay costs to the defendant of and incidental to proceeding up to and including the discontinuance.[10] Courtney J carefully surveyed all the relevant evidence. She noted her inability to reach a conclusion on the substantive issues. The ratio of her decision was:[20] I accept Mr Griggs' submission that, against this background, it wasreasonable for HRINZ to apprehend that Mrs Atkins was directly involved in CHRI and there would be no immediate resolution. It was therefore reasonable for it to issue the proceedings along with the application for interim relief. However, maintaining the proceedings after the letter of 9 October 2014 was unreasonable. It was evident from that letter (proven bysubsequent events) that the defendants were prepared to commit themselves to not using the name that HRINZ objected to. In reality, the substantive complaint that HRINZ had was capable of final resolution at that time. Whatkept the proceedings alive was HRINZ's desire to widen the ambit of thesettlement negotiations beyond the issue of the name of the new organisation and the question of costs. In particular, HRINZ continued to seek agreement from the defendants regarding their future conduct in relation to the new organisation.[21] The parties have very different views about HRINZ's motivation,which I do not need to consider in the context of the present application. But it is clear that, had settlement negotiations been limited to the issues raised in the proceedings, there would have been no need for the application for interim relief to have been maintained as long as it was. I therefore consider that the plaintiff should be entitled to costs up to 9 October 2014 but that the defendants should be entitled to costs after that date. This means that:(a) There will be costs to the plaintiff on a 2B basis for the commencement of the proceedings, preparation of statement of claim and filing of the interlocutory application for interim relief. It appears from the file that submissions were also prepared at that time. If so, the plaintiff is entitled to costs on that item and the preparation of the bundle if that, too, was done at the same time.(b) The defendants are entitled to costs on a 2B basis for steps subsequent to 9 October 2014, including the conference on 27 February 2015.Decision[11] Mr Griggs for HRI submitted that the Judge's findings were based onmaterial errors of fact. In particular he referred to what he says are four factualmistakes made in the Judge's chronological narrative.2 Mr Dench for Elephant takes issue with the detail of Mr Griggs' contention.[12] This difference is immaterial and we do not need to resolve it. The only question is whether the Judge erred in exercising her discretion in finding that HRIacted unreasonably in pursuing its litigation after receiving a letter from Elephant'scounsel on 9 October 2015. Counsel had advised that the new organisation was not part of Elephant and that:The new organisation will now go by the name of "Association of People Professionals". The CHRI website that was under construction has been removed. Problem resolved HRINZ is required to withdraw theproceedings. At the moment my clients will not seek costs. They will seek costs if they are forced to file anything in response. Confirmation that2 At [8]–[12].proceedings have been withdrawn is required by close of business on Tuesday next week.[13] Courtney J adopted the principles settled by this Court for determining a contest under r 15.3.3 The statutory presumption in favour of awarding costs may be displaced if it is just and equitable to do so. However, the Court will not review the merits unless they are so immediately obvious they ought to be considered. Nor will it speculate on the strengths and weaknesses of the respective cases. The reasonableness of the parties conduct is relevant to determining where appropriate the reasons for which the proceedings were brought, continued and defended.[14] Courtney J applied those principles. HRI's case on appeal simply came down to arguing the toss about events subsequent to 9 October 2015. Its submissions fail to acknowledge that Courtney J's order displaced the statutory presumption against HRI for a significant part of the relevant time span. The Judge found it had acted reasonably in issuing the proceeding. She awarded the company costs accordingly. Its complaint now is that the Judge should have exercised her discretion even more favourably.[15] HRI has failed to satisfy us that the Judge erred in concluding that, first,HRI's substantive complaint was capable of final resolution on or about 9 October2014; and, second, the proceeding was kept alive by HRI's wish to expand the ambitof the settlement negotiations beyond what was at issue in the proceeding. It is unnecessary for us to determine whether offers of settlement made by HRI on 28 November 2014 and 18 February 2015 were reasonable and should have been accepted. Elephant's 9 October 2015 letter was an unequivocal statement that its new organisation would go by a name materially different from HRI's brand. Its essence was affirmed in Elephant's undertaking recorded by Muir J in his minuteissued on 27 February 2015.[16] As Courtney J found, the major issues between the parties after 9 October 2015 were liability for costs and Elephant's future conduct relating to the neworganisation. HRI pursued those disputes at its peril, given the statutory presumption3 Kroma Colour Prints Ltd v Tridonicato NZ Ltd (2008) 18 PRNZ 973 (CA) at [12]; Earthquake Commission v Whiting [2005] NZCA 144 at [62]–[72].in Elephant's favour if HRI later discontinued. The Judge had a proper factual foundation for declining to displace that statutory presumption for the subsequent period.[17] HRI's appeal is misconceived and must fail.Result[18] The appeal is dismissed.[19] HRI is ordered to pay Elephant's costs for a standard appeal on a 2B basistogether with usual disbursements.Solicitors:Franks & Ogilvie, Wellington for AppellantDyer Whitechurch, Auckland for Respondents