HUMAN RESOURCES INSTITUTE OF NZ INC v ELEPHANT TRAINING & HR LTD [2015] NZHC 2636

HUMAN RESOURCES INSTITUTE OF NZ INC v ELEPHANT TRAINING & HR LTD [2015] NZHC 2636 [2September 2015]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2014-485-011269[2015] NZHC 2636BETWEEN HUMAN RESOURCES INSTITUTE OFNEW ZEALAND INCORPORATEDPlaintiffAND ELEPHANT TRAINING & HR LIMITEDDefendantHearing: 2 September 2015Appearances: C J Griggs for PlaintiffS C Dench for DefendantJudgment: 27 October 2015JUDGMENT OF COURTNEY JThis judgment was delivered by Justice Courtneyon 27 October 2015 at 4.30 pmpursuant to R 11.5 of the High Court RulesRegistrar / Deputy RegistrarDate.Introduction[1] The plaintiff, Human Resources Institute of New Zealand Incorporated(HRINZ), is a voluntary professional organisation for those in the human resourcesindustry. The first defendant, Elephant Training & HR Ltd (Elephant), is a privatehuman resources company. The second and third defendants, Mr and Mrs Atkins, arethe directors of Elephant. The fourth defendant was, at the relevant time, an employeeof Elephant. HRINZ seeks leave to discontinue the proceedings and costs against thedefendants. The defendants seek costs against the plaintiff.[2] Under r 15.23:Unless the defendant otherwise agrees or the Court otherwise orders, aplaintiff who discontinues a proceeding against the defendant must pay coststo the defendant of and incidental to the proceeding up to and including thediscontinuance.[3] The relevant principles that apply to r 15.23 are well settled, having beenarticulated by the Court of Appeal in Kroma Colour Prints Ltd v Tridonicatco NZ Ltd1and Earthquake Commission v Whiting & Ors.2 The Court has a discretion to orderthat costs lie where they fall or requiring a defendant to pay costs in whole or in part.In essence:There is a presumption in favour of awarding costs to the defendant whichmay be displaced if it is just and equitable to do so. However, the Court willnot undertake a review of the merits unless they are immediately apparent orso obvious that they ought to be considered and will not speculate on thestrength and weakness of the parties' cases. The reasonableness of the parties'conduct is however relevant, including the reason the proceedings werebrought, continued and defended.Background[4] Elephant organised a human resources conference in September 2014. Duringthat conference Mr Atkins announced the establishment of an organisation intended toprovide an alternative to HRINZ for professional development and advocacy services.1 Kroma Colour Prints Ltd v Tridonicatco NZ Ltd (2008) 18 PRNZ 973 at [12].2 Earthquake Commission v Whiting & Ors [2015] NZCA 144 at [62]-[72].It would be called the Chartered Human Resources Institute (CHRI). In mid-September 2014 the new entity established an on-line presence through a new websitewww.chri.org.nz.[5] These developments came to HRINZ's notice. Its solicitors wrote to Elephantobjecting to the name of the new organisation, including on the grounds that the words"human resources institute" would cause brand confusion and breach s 9 of the FairTrading Act 1986. HRINZ asked that Elephant cease trading and operating under theCHRI name.[6] Mr and Mrs Atkins, were overseas when the letter arrived. Their counsel,Mr Dench, advised that CHRI was still being set up and would not be taking any activesteps for at least a month and that he would be unable to get instructions for at least afurther week, when Mr and Mrs Atkins returned. Although initially unacceptable toHRINZ, on 30 September 2014 its counsel, Mr Griggs, wrote indicating that HRINZwould wait until Mr and Mrs Atkins had returned before taking any steps. Mr Griggsconcluded his letter with a specific reservation of right to take further steps should thatbe necessary.[7] As things turned out it did prove to be necessary, at least from HRINZ'sperspective. Later on 30 September 2014 Mr Griggs advised Mr Dench that HRINZhad become aware of a blog Mrs Atkins had written which it interpreted as signallingCHRI's intention not to change its name but instead to resist any legal proceedingsthat might be issued. As a result, HRINZ filed these proceedings the same day andsought interim relief.[8] In a letter dated 9 October 2014 Mr Dench advised that the new organisationwas not part of Elephant and that Mrs Atkins was not involved in setting it up, thoughMr Atkins was the de facto organiser. In relation to the name he advised that:The new organisation will now go by the name of "Association of PeopleProfessionals". The CHRI website that was under construction has beenremoved. Problem resolved.[9] Pointing out that, had HRINZ waited for the Atkins' return the matter couldhave been resolved without issuing proceedings, Mr Dench continued:HRINZ is required to withdraw the proceedings. At the moment my clientswill not seek costs. They will seek costs if they are forced to file anything inresponse. Confirmation that proceedings have been withdraw (sic) is requiredby close of business on Tuesday next week.[10] HRINZ did not discontinue the proceedings. Instead, it made a withoutprejudice offer to settle, the terms of which are not before the Court.[11] The defendants responded by tendering a draft settlement agreement as acounter-offer. Under the draft agreement HRINZ would discontinue the proceedingsand the defendants would agree not to use the objectionable words and would pay 50per cent of the plaintiff's scale costs.[12] HRINZ rejected that proposal and made an alternative suggestion by tenderinga draft settlement agreement, which would have seen the defendants agree not to usethe objectionable words, the plaintiff discontinue the proceedings, the parties bear theirown costs and, in addition, agree to a variety of measures directed towards controllingany acrimony between the plaintiff and the new organisation. The defendants rejectedthat proposal.[13] On 27 February 2015 there was a court hearing at which it was suggested thatthe matter might be resolved with undertakings from the defendants. That course wasaccepted and the defendants' undertaking not to use the objectionable words in relationto the new organisation was recorded in Muir J's minute of the same date. Attemptscontinued to resolve the issue of costs, with HRINZ seeking to draw other issues intothe ambit of any settlement. On 26 March 2015 Mrs Atkins contacted the HRINZ'schief executive directly, suggesting that HRINZ simply withdraw the proceedings andthe parties bear their own costs. HRINZ reiterated the offer that had been made on 18February 2015. That was rejected. The defendants, once again, proposed that theproceedings be discontinued and neither party seek costs and, if necessary, there be aformal agreement that the objectionable name not be used.[14] On 24 April 2015 NRINZ made a further proposal, namely an agreement thatthe defendants would not use the objectionable words and would pay the plaintiff costsof $6,000 and that neither party would publish defamatory material about the other.This was not accepted and the plaintiffs brought the present application for leave todiscontinue the proceedings and for costs.Application[15] The defendants say that the plaintiff's claim was without merit because theproposed name, coupled with other distinctive features meant that there was no realrisk of passing off or breach of the Fair Trading Act. Further, Ms Atkins and Elephantwere not responsible for the name of the new organisation.[16] I cannot reach any conclusion on the substantive issues in the context of thepresent application. I do note that the matter was ultimately resolved through anundertaking by the defendants not to use the objectionable words and, further, that indraft settlement agreements they prepared a similar provision was included, thoughthe defendants say that this was merely pragmatism. I also think it relevant that, whilstthe defendants (through counsel) conveyed that no response could be provided untilMr and Mrs Atkins returned to New Zealand, Mrs Atkins was plainly able to considerand respond (through her blog) to the letter from HRINZ's solicitors.[17] Mr Griggs, for HRINZ, argued that HRINZ was justified in issuing theproceedings, seeking interim relief and not discontinuing the proceedings earlier (savefor the concession that the proceedings should have been filed in Auckland andacceptance that the defendants should therefore be entitled to costs on their applicationto transfer the proceedings).[18] As to the reasonableness of its actions and in joining all the defendants,Mr Griggs, for HRINZ, pointed out that the conference at which the organisation waslaunched was been organised by Elephant, that Mr Atkins had publicly stated that hewas involved, that although Mrs Atkins had not made the same express statement itwas evident from her relationship with Mr Atkins and her position as a director ofElephant (and her subsequent blog) that she was directly involved. He pointed to anemail sent by Elephant on 7 August 2014 which included the following statement:Here at Elephant we've been involved in the establishment of a new Institute– which will be far more innovative, forward thinking and focused on HR asa real business partner. This will be another step in transforming ourprofession!If you're not able to make it to the conference, but want information about thenew HR Institute, let us know – and we can make sure it gets to you.[19] Ms Hunter had published an "announcement" by Facebook on or around7 August 2014. The material provided in the common bundle included a screen shotof a Facebook page titled CHRI update by Ms Hunter advising that an overview packfor CHRI was to be emailed out in the next week or so.[20] I accept Mr Griggs' submission that, against this background, it was reasonablefor HRINZ to apprehend that Mrs Atkins was directly involved in CHRI and therewould be no immediate resolution. It was therefore reasonable for it to issue theproceedings along with the application for interim relief. However, maintaining theproceedings after the letter of 9 October 2014 was unreasonable. It was evident fromthat letter (proven by subsequent events) that the defendants were prepared to committhemselves to not using the name that HRINZ objected to. In reality, the substantivecomplaint that HRINZ had was capable of final resolution at that time. What kept theproceedings alive was HRINZ's desire to widen the ambit of the settlementnegotiations beyond the issue of the name of the new organisation and the question ofcosts. In particular, HRINZ continued to seek agreement from the defendantsregarding their future conduct in relation to the new organisation.[21] The parties have very different views about HRINZ's motivation, which I donot need to consider in the context of the present application. But it is clear that, hadsettlement negotiations been limited to the issues raised in the proceedings, therewould have been no need for the application for interim relief to have been maintainedas long as it was. I therefore consider that the plaintiff should be entitled to costs upto 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 commencementof the proceedings, preparation of statement of claim and filing of theinterlocutory application for interim relief. It appears from the file thatsubmissions were also prepared at that time. If so, the plaintiff isentitled 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 subsequentto 9 October 2014, including the conference on 27 February 2015.[22] I do not make any order for costs on the present application. Both parties havesucceeded in part. Costs will lie where they fall.____________________P Courtney J