INTERNATIONAL PROCESS SYSTEMS LTD V NEW ZEALAND DAIRIES LTD HC CHCH CIV 2009-476-000282

INTERNATIONAL PROCESS SYSTEMS LTD V NEW ZEALAND DAIRIES LTD HC CHCH CIV 2009-476- 000282 5 October 2011IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYCIV 2009-476-000282BETWEEN INTERNATIONAL PROCESS SYSTEMSLIMITEDPlaintiffAND NEW ZEALAND DAIRIES LIMITEDDefendantHearing: Determined on the papers(Heard at Christchurch)Counsel: F A Barker for Applicant/DefendantD Grant, Liquidator of Respondent/PlaintiffJudgment: 5 October 2011JUDGMENT OF ASSOCIATE JUDGE OSBORNEas to costs[1] The defendant seeks costs in relation to a struck-out claim.[2] The litigation was commenced by the plaintiff on 18 June 2009, followed bythe defendant's summary judgment application (which was subsequently withdrawn), reached an impasse over the scope of the plaintiff's discovery in March 2010, became the subject of a defendant's application in relation to discovery inJanuary 2011, became further complicated by the plaintiff's liquidation on 13 April2011, and was eventually the subject of an order of this Court on 1 April 2011 whereby the plaintiff was ordered to file and serve by 15 April 2011 an affidavit ofdiscovery which complied with the High Court Rules (pursuant to the defendant'sJanuary 2011 application).[3] In breach of the discovery order, the plaintiff did not file a further affidavit of discovery either within the 14 day period or at all. The defendant sought an unless order requiring compliance with the order for discovery within 14 days. Theliquidator of the plaintiff appeared on a case management conference and sought a longer period of 60 days within which to comply. The liquidator had no objection to an unless order on that basis.[4] On 20 July 2011, Associate Judge Matthews ordered that unless the plaintiffcomplied with the Court's discovery order on or before 20 September 2011 the plaintiff's claim would be struck out.[5] The plaintiff did not comply with the unless order. By virtue of the unlessorder the plaintiff's claim was therefore to be treated as struck out on 21 September2011.[6] The liquidator of the plaintiff has filed a memorandum which does not seek any relief from the consequences of non-compliance with the unless order. To the contrary, the liquidator records consent to the striking out (which is strictly unnecessary as the striking out of the claim has taken effect).Costs[7] The defendant seeks increased costs.The defendant's claim[8] The defendant seeks an order for costs of $62,980.00 together with disbursements. The break-down of the costs application is as set out in the Schedule to this judgment.[9] In his submissions for the defendant, Mr Barker referred to what he called the"relevant events" which I now summarise –1. The plaintiff's initial discovery (which group listed approximately26,000 documents) did not comply with the Rules – when the defendant would not agree to a variation of the usual discovery requirements the plaintiff unilaterally filed a non-compliant list.2. The defendant, before making an application in relation to the discovery issue, offered to compromise by accepting electronicdiscovery on agreed parameters. The plaintiff's discovery whenreceived through that form still did not comply with the agreed parameters in that it included substantial amounts of irrelevant material.3. The plaintiff when requested to remedy deficiencies refused to do so.4. The defendant then made its application for interlocutory orders, which involved the inspection of a large volume of documents simply to identify a representative sample (some 1,157 pages) of irrelevant documents relating to one month alone. Objectionable material was also identified.5. The Court then on 1 April 2011 ordered the plaintiff to file a compliant affidavit of discovery by 15 April 2011.6. The shareholders of the plaintiff placed the plaintiff in liquidation on 13 April 2011. The affidavit of documents was not filed.7. The unless order was made on 20 July 2011 and the affidavit was still not filed.8. Counsel for the defendant estimates that 60 per cent of the electronic discovery was inspected with much of that cost wasted and approximately 100,000 pages of documents were the subject of inspection.9. For its part, the defendant completed its discovery obligations by filing a compliant affidavit which, in listing documents individually, ran to 860 pages.[10] Counsel has in his memorandum gone into more detail on some of these aspects. On any view of the matter, the scope of the defendant's discovery and theattendances which the defendant had to undertake to deal with the plaintiff'sdiscovery were far beyond those which could normally be expected.Liquidator's submissions[11] In relation to the plaintiff's discovery, the liquidator submits that the defendant is seeking to gain an advantage from its own uncompromising and unnecessary approach to this litigation. He submits that the defendant ought to have agreed to a variation of the requirements of discovery as that might have had the effect of reducing the number of discoverable documents.[12] The liquidator submits that uplift of costs of the level being sought by the defendant would effectively be punitive costs imposed on the plaintiff for failing to comply with Court orders.[13] The liquidator accepts that the plaintiff may have failed to comply with orders and notes that he was not involved in the process and was not in a position to comment.[14] Finally, the liquidator submits that failings of the plaintiff were failings of omission which caused delay. He submits that no omission or commission of theplaintiff "contributed unnecessarily to the time or expense of the proceeding".Discussion[15] As the liquidator accepts, costs must follow the event in this case: r 14.2(a) High Court Rules applies. The real issue is as to how much those costs should be.[16] The next principle under r 14.2(b) is significant, namely that an award of costs should reflect (inter alia) the complexity of the proceeding. I also remind myself that the Court's ultimate discretion under r 14.1 is one which I may resort toto enable the unexpected and the unforeseen to be fairly accommodated: Glaister v Amalgamated Dairies Ltd1.1 Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 at [24].[17] Against this background, I turn to the individual steps in the proceeding.Commencement of defence[18] The defendant seeks an award based primarily on a 2B calculation. This is appropriate.[19] For the defendant's discovery - based on the extent of the defendant'sdiscovery - Mr Barker has submitted that Band C should apply ("a comparativelylarge amount of time for the particular step is considered reasonable"). I agree. A2C award is appropriate.[20] For production of documents for inspection, in a parallel way Mr Barker has suggested a 2C award. Again that is appropriate having regard to the number of documents produced by the defendant.[21] For inspection of documents, again, the sheer volume of the plaintiff'sdiscovery of documents indicates a Band C determination. Mr Barker submits thatthe plaintiff's failure to comply with the rules relating to discovery unnecessarily increased the time and costs associated with inspection and an increase of 50 percent is thereby justified for that step. Rule 14.6(b)(1) ("failing to comply with these rules or with the direction of the Court") is applicable. The Court's record speaks for itself. Both the time and expense taken up by the plaintiff's continuing failures inrelation to discovery significantly and unnecessarily affected the defendant. These did not merely cause delay. They added to expense. The fact that the liquidatormight see the plaintiff's failures as failures of omission is beside the point. The defendant's costs and time were taken up through the plaintiff's failures to comply.A 50 per cent uplift on a 2C award is appropriate.[22] For filing memoranda for case management conferences, the defendant seeks allowance for those steps on a 2B basis. That is appropriate.[23] For appearances at case management conferences, the defendant again seeks allowance on a 2B basis. That is again appropriate.[24] For preparation and filing of discovery application, Mr Barker submits that Band C is appropriate having regard to the volume of documents which had to be considered and referred to in the discovery application. I agree.Conclusion[25] The costs sought by the defendant in a total sum of $47,940 (as set out in the Schedule) are appropriate having regard to the principles to which I have referred and (in relation to the uplift for inspection of documents) having regard to the unnecessary contribution to the time and expense of the proceeding caused by theplaintiff's approach to discovery. This is not a punitive award of costs. It is anaward based directly on the reasonable time in relation to each particular step and (in relation to inspection) the extent to which the plaintiff contributed unnecessarily to the time and expense of the proceeding.Order[26] I order –1. The plaintiff is to pay the defendant's costs of this proceeding in thesum of $47,940; and2. The plaintiff is to pay disbursements as fixed by the Registrar.Staying of the counterclaim[27] The plaintiff has a counterclaim in this proceeding. The effect of theplaintiff's liquidation was to stay that counterclaim: s 248(1)(c) Companies Act1993. It is a matter for the defendant now to take up the subject matter of the counterclaim with the liquidators of the plaintiff. If the subject matter of the counterclaim is to be to be pursued with the liquidator, I invite counsel for thedefendant to do so without delay. If and when the point is reached that a discontinuance may be filed on agreed terms, it should be promptly filed. In these circumstances, the proceeding is not adjourned to a date certain.____________________Associate Judge OsborneSolicitors:Buddle Findlay, PO Box 2694, Wellington 6140Waterstone Insolvency, PO Box 352, Auckland