SNOWDON V RADIO NEW ZEALAND LIMITED CA CA318/2009

SNOWDON V RADIO NEW ZEALAND LIMITED CA CA318/2009 25 November 2009IN THE COURT OF APPEAL OF NEW ZEALAND CA318/2009 [2009] NZCA 557BETWEEN LYNNE FRANCES SNOWDON Applicant AND RADIO NEW ZEALAND LIMITED Respondent Hearing: 17 November 2009 Court: Glazebrook, Chambers and Baragwanath JJ Counsel: R A Moodie and J A Hickling for Applicant M F Quigg and J L Bates for Respondent Judgment: 25 November 2009 at 4.30 pmJUDGMENT OF THE COURT A Leave to appeal is granted on the following questions of law: (a) Did the Employment Court properly exercise its discretion in relation to the quantum of costs it ordered the applicant to pay in light of the new approach to costs in the High Court Rules? (b) Did the Employment Court take the proper approach to the question of fraud? B Costs are reserved.____________________________________________________________________REASONS OF THE COURT(Given by Glazebrook J)Table of ContentsPara NoIntroduction [1]The recusal application [4]Judge Shaw's decision [7]The legislation [16]Should leave to appeal be granted? [18]Result [25]Introduction[1] On 5 February 2007 Ms Snowden filed an application for Judge Shaw to recuse herself from proceedings before the Employment Court. The proceedings relate to a personal grievance Ms Snowden is pursuing against her former employer, Radio New Zealand. [2] The recusal application was set down for hearing on 19 February 2007. The hearing did not proceed as Ms Snowden was ill and she was unrepresented at the time. On 25 August 2008 Ms Snowden was granted leave to bring the recusal application but three days later the application was adjourned pending the outcome of another application. That other application was eventually struck out. [3] On 30 November 2008 Ms Snowden discontinued her recusal application. On 6 May 2009 Judge Shaw ordered Ms Snowden to pay costs of $30,000 to Radio New Zealand in relation to the discontinued recusal application. Ms Snowden seeks leave to appeal against that costs decision.The recusal application[4] The grounds of the recusal application were set out under the following headings (the bracketed comments being those of Judge Shaw):(a) Gratuitous, unreasonable and unhelpful finding of lack of good faith (in a judgment dated 17 July 2003: [2003] 1 ERNZ 12); (b) Unsustainable findings relating to notices requiring and objecting to disclosure (in a judgment dated 16 December 2005); (c) Extensive ad hoc excising and non-disclosure allowed by Judge; (d) Full and proper disclosure evaded: proceedings miscarry; (e) No comprehensive list or index of Radio New Zealand's documents; (f) No comprehensive list of objections or claims to privilege existing; (g) Farcical discovery of electronic data allowed; (h) Spirit, intent of regulations not given effect to, resulting in lengthy delays and unnecessary expense; (i) Extensive information given [to the] Judge by Radio New Zealand not inspected by, or disclosed to, Ms Snowden's counsel. (This concerned the judicial inspection of documents); (j) Full disclosure by Radio New Zealand would be decisive; (k) Further involvement of counsel and forensic accountants pointless; (l) Ms Snowden being denied fair process, natural justice; (m) A case of allegations and counter-allegations of financial mismanagement and misreporting; (n) Proper discovery process denied to Ms Snowden from the outset; (o) No discovery achieved in these proceedings;(p) Miscarriage of justice already in these proceedings; (q) Forensic accountants withdraw; (r) Hearing without adequate discovery a veritable farce. [5] The remedies sought in the application were: (a) That Judge Shaw recuse herself and have no further involvement in these proceedings; (b) That Radio New Zealand be ordered by the replacement Judge to make a full and proper response to Ms Snowden's notice requiring disclosure dated 7 September 2004; (c) That independently managed electronic discovery of the material purportedly discovered on five CD ROMs be ordered by the Court as recommended by Mr Spence; (d) That Radio New Zealand pays the costs of and incidental to this application. [6] A number of affidavits were filed in support of the application when it was first filed. Three further affidavits in support were filed on 28 August 2008. Judge Shaw described those further affidavits as follows:Of these one was an IT specialist, Stephen Foris, who explained his detailed examination of computer disks disclosed by the defendant. Two further affidavits by Mr Vance, one appending over 300 pages and accompanied by 19 Eastlight folders of exhibits. The other was accompanied by two more Eastlight folders. The third was by Andrew McMillan, another IT specialist.Judge Shaw's decision[7] Judge Shaw considered that, as the recusal application was brought and discontinued, r 15.23 of the High Court Rules applied by analogy. She saw the issueas being whether the Court should exercise its discretion to order costs in the particular circumstances of the case. [8] In Judge Shaw's view, it was clear from both the grounds listed in the recusal application and the orders sought that the purpose of the application was to attempt to re-litigate the judgments of the Court about disclosure and to obtain orders which had previously been sought by Ms Snowden but refused. The Judge noted that of the 18 grounds listed by Ms Snowden in support of the application for recusal 15 were expressly about the disclosure orders made in earlier judgments of the Court. [9] Further, the Judge pointed out that two of the three remaining grounds were that Ms Snowden was denied fair process and natural justice and that there had been a miscarriage of justice in the proceeding. Although presented as a ground for recusal, those particulars were alleged outcomes of the alleged failures relating to disclosure. They were not stand-alone grounds in their own right. [10] In the remaining ground, Ms Snowden was critical of the Court's judgment of 17 July 2003. That judgment did not concern disclosure. Judge Shaw said that the Court cannot review its own decision other than in circumstances which would justify a rehearing. She said that the appropriate forum for criticising the judgment would have been by way of appeal to this Court. Ms Snowden had not lodged an appeal. [11] As to the substance of the costs application, Judge Shaw rejected a submission by Ms Snowden's counsel that the recusal proceedings never got past a very preliminary stage. She noted that the application was full and detailed and the affidavits in support were comprehensive. Radio New Zealand had responded, as it was bound to, by way of a notice of opposition and affidavits in opposition. In the Judge's view, there was no basis for finding that Radio New Zealand acted unreasonably in its decision to defend the application. In her view, the proceedings were well advanced towards a hearing. [12] Judge Shaw was satisfied that the recusal application was a misconceived and unreasonable attempt to remove the Judge from a case because Ms Snowdendisagreed with the Judge's decisions. She was also satisfied that Radio New Zealand had been obliged to commit significant legal and other resources to defending the application. There were in her view no circumstances in the case to displace the presumption that costs must be paid on the discontinuance of a proceeding. [13] She rejected Ms Snowden's submission that an award of costs would mean that Radio New Zealand may be seen to be benefiting from its own fraud. She pointed out that Ms Snowden's allegations of fraud were contained in separate proceedings and these (and the consequences to Radio New Zealand) would be determined on their own merits in that context. The Judge pointed out that, in any event, Radio New Zealand would receive no benefit from a costs award in those proceedings other than a partial contribution to its actual costs. [14] In the circumstances, Judge Shaw concluded that Radio New Zealand was entitled to a contribution to its actual and reasonable costs on the discontinued application for recusal. She considered that the legal costs listed in the memorandum of counsel for Radio New Zealand were appropriate and necessary. Ms Snowden was therefore ordered to pay $30,000to Radio New Zealand (being two-thirds of $45,000). [15] The Judge made no order, however, in relation to the costs of Price Waterhouse Coopers incurred in the course of the recusal application. She considered that the work done by that firm would be relied on by Radio New Zealand in the course of Ms Snowden's further applications before the Court. These included the substantive proceedings and the question of reimbursement of those costs could be determined, if necessary, as part of those continuing proceedings.The legislation[16] The Employment Court is vested with a discretion under cl 19, Schedule 3 of the Employment Relations Act 2000 to award costs in any proceedings in that Court. Clause 19 provides:19 Power to award costs(1) The Court in any proceedings may order any party to pay to any other party such costs and expenses (including expenses of witnesses) as the Court thinks reasonable. (2) The Court may apportion any such costs and expenses between the parties or any of them as it thinks fit, and may at any time vary or alter any such order in such manner as it thinks reasonable.[17] The High Court rule referred to by Judge Shaw in her decision provides:15.23 CostsUnless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.Should leave to appeal be granted?[18] The first point we would make is that r 15.23 of the High Court Rules is not the correct rule. That rule relates to the discontinuance of a proceeding. That has not occurred here. All that has happened is that an interlocutory application has been discontinued. The correct rule was r 14.8. The mistake was, however, of no moment. Under r 14.8, as under r 15.23, a party who discontinues an application would normally pay the other party's costs. Rule 14.8 provides:14.8 Costs on interlocutory applications(1) Costs on an opposed interlocutory application, unless there are special reasons to the contrary,— (a) must be fixed in accordance with these rules when the application is determined; and (b) become payable when they are fixed. (2) Despite subclause (1), the court may reverse, discharge, or vary an order for costs on an interlocutory application if satisfied subsequently that the original order should not have been made. (3) This rule does not apply to an application for summary judgment.[19] More importantly, however, the actual costs consequences of Judge Shaw's approach and the approach under the High Court Rules will differ substantially. While referring to the High Court Rules, Judge Shaw took an approach to costs which started with the actual costs of Radio New Zealand, assessed the reasonableness of those costs and then awarded two thirds of that sum: see at [14] above. This is no longer the approach to costs taken in the High Court, the District Court or indeed this Court. The principles relating to costs in the High Court are set out in r 14.2 as follows:14.2 Principles applying to determination of costsThe following general principles apply to the determination of costs: (a) the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds: (b) an award of costs should reflect the complexity and significance of the proceeding: (c) costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application: (d) an appropriate daily recovery rate should normally be two- thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application: (e) what is an appropriate daily recovery rate and what is a reasonable time should not depend on the skill or experience of the solicitor or counsel involved or on the time actually spent by the solicitor or counsel involved or on the costs actually incurred by the party claiming costs: (f) an award of costs should not exceed the costs incurred by the party claiming costs: (g) so far as possible the determination of costs should be predictable and expeditious.[20] In accordance with rr 14.3 – 14.5 proceedings are classified as falling into one of three categories. Appropriate daily recovery rates and a determination of a reasonable time for each step are set out in Schedules to the High Court Rules. The approach to costs in the High Court Rules thus differs from the approach used by Judge Shaw.[21] It is true that Judge Shaw was following the long established practice regarding costs that is followed in the Employment Court. In construing the costs provision in cl 19, however, regard may be had to s 6 of the Interpretation Act 1999 which states that an enactment applies to circumstances as they arise. Such circumstances may include the change in costs policy that was discussed in Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400 (CA). [22] There must, therefore, be an issue of law (of general and public importance) as to whether the Employment Court should (by analogy) follow the approach to costs followed by the District Court, the High Court and this Court. We recognise, however, that the special character of the Employment Court and the lack of the statutory equivalent of rr 14.2 – 14.8 of the High Court Rules may mean that the traditional means of fixing costs in that Court should be maintained. [23] Even if the answer is that the approach should now equate to that outlined in the High Court Rules, we note that this would not necessarily mean that the actual costs order was excessive. Judge Shaw took the view that the application was an abuse of process (being an attempt to re-litigate matters that had already been dealt with) and wholly without merit. If that were the case, there may well have been an argument for increased or indemnity costs by analogy with r 14.6 of the High Court Rules:14.6 Increased costs and indemnity costs(1) Despite rules 14.2 to 14.5, the court may make an order— (a) increasing costs otherwise payable under those rules (increased costs); or (b) that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs). (2) The court may make the order at any stage of a proceeding and in relation to any step in it. (3) The court may order a party to pay increased costs if— (a) the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by— (i) failing to comply with these rules or with a direction of the court; or (ii) taking or pursuing an unnecessary step or an argument that lacks merit; or (iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or (iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or (v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or (c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or (d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious. (4) The court may order a party to pay indemnity costs if— (a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or (b) the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or (c) costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or (d) the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or (e) the party claiming costs is entitled to indemnity costs under a contract or deed; or (f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.[24] The final issue is whether Judge Shaw was correct to reject the submission that an award of costs would be tantamount to allowing Radio New Zealand to benefit from its own fraud, assuming the fraud allegations are found to have substance. Judge Shaw held that the recusal application was an attempt by Ms Snowden to re-litigate discovery issues. As we understand it, the allegation is that Radio New Zealand was resisting full discovery or providing misleading discovery to cover up its fraud. Even if the recusal application was a misconceived process for dealing with that allegation (given that the alleged fraud was that of Radio New Zealand), there is a question whether the alleged fraud (if proved) could properly be ignored in setting costs in relation to the discontinuance.Result[25] Leave to appeal is thus granted on the following questions of law: (a) Did the Employment Court properly exercise its discretion in relation to the quantum of costs it ordered the applicant to pay in light of the new approach to costs in the High Court Rules? (b) Did the Employment Court take the proper approach to the question of fraud? [26] The appeal should not, however, be brought on for hearing until the allegations of fraud have been dealt with in the Employment Court. In fairness to Radio New Zealand, we record that those allegations are strenuously denied. [27] It is likely that this Court will, when it does deal with the appeal, decide to recalculate the costs itself should it decide that Judge Shaw's approach to costs was wrong. This is because Judge Shaw has now retired with the consequence that she is not available to undertake the task. Any other judge of that Court would be in no better position than this Court in undertaking the task; he or she would have to approach the task on the basis of the record, just as this Court would. Secondly, the amount of money involved is not particularly great. This litigation is now of huge proportions and the Court would no doubt be reluctant to impose yet another hearingon the parties. The parties' submissions should therefore deal with quantum in the event that the appeal is allowed. [28] Costs on this application are reserved.Solicitors: Moodie & Co, Fielding for Applicant Quigg Partners, Wellington for Respondent