ALALAAKKOLA v PALMER [2021] NZHC 3101

ALALAAKKOLA v PALMER [2021] NZHC 3101 [17 November 2021]IN THE HIGH COURT OF NEW ZEALANDBLENHEIM REGISTRYI TE KŌTI MATUA O AOTEAROATE WAIHARAKEKE ROHECIV-2020-406-5[2021] NZHC 3101BETWEEN SIRPA ELISE ALALAAKKOLAApplicantAND PAUL ANTHONY PALMERRespondentHearing: On the PapersCounsel: C L Elliott QC for ApplicantB A Fletcher for RespondentJudgment: 17 November 2021JUDGMENT OF ISAC J[Leave to Appeal and Costs]Introduction[1] Ms Alalaakkola applies for leave to appeal a decision of the High Court1determining an appeal from the Family Court.2 There is also a question of costs.[2] I have concluded that leave should be granted on the question of law outlinedat [17]. I have also awarded Mr Palmer costs on a 2B basis.Background[3] For the purposes of this application, only a brief summary of the proceeding isrequired.1 Palmer v Alalaakkola [2021] NZHC 2330.2 Alalaakkola v Palmer FAM-2017-006-00016, 10 February 2020; Alalaakkola v Palmer [2020]NZFC 1635. It is the second decision that determined the issue of copyright in the artworks andoccupational rent.[4] Ms Alalaakkola is a painter. During her 20-year marriage to Mr Palmer shecreated a number of original works. On separation an issue arose as to the status ofcopyright in the paintings: did the copyright amount to relationship property? TheFamily Court found copyright in the artworks was Ms Alalaakkola's separate property.Mr Palmer appealed that finding to this Court, as well as an issue relating to occupationrent which is not relevant to this application.[5] In a judgment delivered on 7 September of this year I allowed Mr Palmer'sappeal in part.3 I found that the copyright in the paintings was relationship property.In summary, my reasons for this conclusion were:(a) Copyright is a proprietary right, and the definition of property in s 2 ofthe Property (Relationships) Act 1976, in particular the phrase "anyother right or interest" at s 2(e), captures copyright in artworks;(b) There is no indication in either the Copyright Act or the Property(Relationships) Act that s 16 of the Copyright Act — which effectivelyvests the exclusive right to copy the work in its author — was intendedto remove intellectual property from the reach of the Property(Relationships) Act; and(c) At the point Ms Alalaakkola put her skill towards the production of anartwork during the course of the relationship, the subsequent copyrightin that work became relationship property, as it came into existenceduring the relationship.[6] In light of those findings, I found it was not open for the Family Court Judgeto exercise a discretion on whether or not to transfer an interest in the copyright toMr Palmer, or indeed to allow an unequal division of the copyright. The equal sharingpresumption may only be displaced in extraordinary circumstances that make equalsharing repugnant to justice. I did not consider that to be the case here. I thereforeremitted this issue back to the Family Court, noting the valuation of the copyright willbe the most challenging task.3 Palmer v Alalaakkola, above n 1.Grounds of appeal[7] Broadly, Mr Elliot QC raises the following grounds of appeal:(a) I gave undue preference or weight to the Property (Relationships) Actover the Copyright Act 1994;(b) I misdirected myself in relation to the issue of the presumption of equalsharing, specifically my interpretation of the Family Court decision;(c) I gave insufficient or no weight to the Family Court Judge's view thatthe paintings had two distinct property rights and that these rights wereseverable, and that I erred in not giving sufficient weight to the fact thatcopyright is an intensely personal skill;(d) I erred in conflating the assets of a business with personal property;(e) I fell into error in finding that it was not open to the Family Court Judgeto exercise the discretion noted at [6] above;(f) I erred in concluding that the fact Ms Alalaakkola may find herself incompetition with herself was not a reason to decline to transfercopyright; and(g) my findings were contrary to the clean break principle.[8] Mr Fletcher unsurprisingly rejects these grounds of appeal, but submits that ifleave is granted the grounds of appeal should be distilled to the essence of the matter,that is: is copyright in artistic works produced during the marriage "property" in termsof the Property (Relationships) Act? If it is property as defined, then on the facts ofthis marriage is it relationship property or separate property?Leave to appeal[9] The application for leave to appeal is governed by s 60 of the Senior CourtsAct 2016.4 The test is well-established. The appeal must raise some question of law orfact capable of bona fide and serious argument in a case involving some public orprivate interest of sufficient importance to outweigh the cost and delay of the furtherappeal.5 The threshold for leave to bring a second appeal is high, and the purpose of asecond appeal to the Court of Appeal is not general correction of error, but to clarifythe law and to determine whether it has been properly construed and applied by theCourt below.6 When the disputed matter is entirely or largely a question of fact thetask of the applicant is harder.7Discussion[10] I do not think there can be any doubt that this appeal raises a question of lawcapable of serious argument and that it involves a public or private interest of sufficientimportance to outweigh the cost and delay of the further appeal.[11] There is clearly a live — and novel — question concerning the interaction ofthe Property (Relationships) Act and the Copyright Act. As far as I can tell, this hasnot been the subject of judicial consideration in this country before. The resolution ofthe issue will also have consequences for the wider creative community and indeedNew Zealand's property relationship law. These factors clearly outweigh the cost anddelay of the further appeal.[12] The real issue is how best to frame the questions for appeal, which the partieshave been unable to agree upon.[13] Mr Elliott proposes a single question with four subparts:Whether copyright is property within the meaning of the PRA. If copyright isproperty within the meaning of the PRA, whether it should be classified as4 Section 39B of the Property (Relationships) Act 1976 which makes the Senior Courts Act 2016applicable to appeals against decisions of the High Court.5 Waller v Hider [1998] 1 NZLR 412 at 413 (CA).6 Simon v Wright [2014] NZCA 199 at [6]–[7] citing Waller v Hider, above n 5, and Snee v Snee(1999) 13 PRNZ 609 (CA).7 At [7].separate property, relationship property, or the property of the parties' separatebusinesses. If copyright is relationship property, whether there areextraordinary circumstances that make equal sharing repugnant to justice. Ifcopyright is relationship property subject to equal division, whether thecopyright should remain with or otherwise be vested in the author, leavingonly the value to be shared at the Court's discretion.[14] Mr Fletcher accepts the first part of the framed question is appropriate, being:Whether copyright is property within the meaning of the PRA. If copyright isproperty within the meaning of the PRA, whether it should be classified asseparate property, relationship property[15] He submits, however, the remainder of the question is inappropriate. Referenceto "or the property of the parties' separate businesses" has no basis in law given theAct defines relationship property and separate property; the "extraordinarycircumstances'" reference is not squarely raised in the formal leave application; andin any event that is a factual question, not a question of law of general importance.[16] I accept Mr Fletcher's submission. The question for the Court of Appeal shouldnot be unduly restrictive and should be broad enough to capture the issues at play. Ofcourse, the Court of Appeal is not constrained by the question for appeal as I define it.[17] I consider this to be sufficient:Is copyright "property" for the purposes of the Property (Relationships) Act?If so, how should it be classified in terms of that Act?[18] Questions as to whether extraordinary circumstances exist that make equalsharing repugnant to justice and whether the copyright should remain with orotherwise be vested in the author are both factual matters that are consequential on theanswer to the legal question identified at [17] above, and are specific to thisproceeding. So, they may well be considered, but should not form part of the questionfor appeal.Result[19] I grant leave to appeal to the Court of Appeal on the question of law outlinedat [17].Costs[20] There remains the issue of costs for the High Court proceedings.[21] The parties have been unable to agree on these because although Mr Palmerwas largely successful, Ms Alalaakkola did not engage in the High Court proceedings.Mr Elliot submits — in reliance on Kawerau Jet Services Holdings Ltd v QueenstownLakes District Council8 and Wang v North Shore District Court (No 3)9 — that itwould be wrong for a party who has chosen not to engage in any way in the proceedingto be responsible for costs. He invites the Court to exercise its discretion under r 14.7to refuse to make an order for costs.[22] All matters relating to costs are of course discretionary.10 But the discretionmust be exercised on a principled basis. And the determination of costs, so far aspossible, should be both predictable and expeditious.11[23] The two cases cited by Mr Elliot are readily distinguishable. They bothinvolved parties who indicated they would abide the Court's decision. Ms Alalaakkolais not in that position. She simply chose not to participate in the appeal before the HighCourt. She also did not advise the Court that she would abide. In fact, her decision toappeal to the Court of Appeal indicates that was never her position. I do not considera party who picks and chooses when they wish to appear in a proceeding affectingtheir interests can expect to be immunised from costs.[24] Nor can I see any reason why Mr Palmer — who was successful on the mainpoint of the appeal — is not entitled to costs, or that there should be a departure fromthe usual course that the party who fails with respect to a proceeding should pay coststo the party who succeeds.128 Kawerau Jet Services Holdings Ltd v Queenstown Lakes District Council, HC Invercargill CIV-2008-425-518, 19 May 2009.9 Wang v North Shore District Court (No 3) [2015] NZHC 1611, [2015] NZAR 1678.10 High Court Rules, r 14.1.11 Rule 14.2(1)(g).12 Rule 14.2(1)(a).[25] Mr Palmer is awarded costs as claimed on a 2B basis.Isac JSolicitors:Zone Law Ltd, Wellington for ApplicantGascoigne Wicks, Blenheim for Respondent