CAYMAN SPECTRUM (NZ) CO v SPARK NEW ZEALAND TRADING LTD [2023] NZHC 754

CAYMAN SPECTRUM (NZ) CO v SPARK NEW ZEALAND TRADING LTD [2023] NZHC 754 [5 April2023]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2018-404-2687[2023] NZHC 754BETWEEN CAYMAN SPECTRUM (NZ) COFirst PlaintiffEVEREST WIRELESS PARTNERS I LPSecond PlaintiffAND SPARK NEW ZEALAND TRADINGLIMITEDDefendant2DEGREES MOBILE LIMITEDNon-PartyHearing: By memorandaAppearances: M B Wigley for PlaintiffsO J Skilton for Non-PartyJudgment: 5 April 2023JUDGMENT OF LANG J[on costs payable to non-party]This judgment was delivered by me on 5 April 2023 at 3 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate..Solicitors / Counsel:Wigley and Company, WellingtonO J Skilton, Barrister, Auckland[1] On 7 February 2023 I heard several discovery applications filed by theplaintiffs against the defendant. I was scheduled to hear an application for non-partydiscovery against 2degrees Mobile Ltd (2degrees) the following day.[2] On the morning of 8 February 2023 the plaintiffs withdrew their applicationfor non-party discovery against 2degrees. I am now required to fix costs in relation tothat application.[3] 2degrees seeks an order that it be reimbursed the legal costs it has incurredamounting to the sum of $47,165 exclusive of GST. It also seeks costs in relation tothe preparation and filing of its memorandum and affidavit dealing with costs.Background[4] In this proceeding the plaintiffs claim that the defendant, Spark New ZealandTrading Ltd (Spark), assisted 2degrees in an attempt to acquire broadband spectrumto the plaintiffs' commercial disadvantage. The plaintiffs sought non-party discoveryagainst 2degrees to obtain evidence to support their claim.[5] During June 2022 the plaintiffs' solicitor entered into correspondence with2degrees regarding documents that they believed 2degrees might hold that wererelevant to the claim. By this stage the plaintiffs had filed an application seekingdiscovery of those documents from 2degrees.[6] On 7 October 2022, the plaintiffs filed and served an amended applicationseeking varied orders as to discovery to be provided by 2degrees. Prior to the hearingcounsel for the plaintiffs and 2degrees filed and served written submissions. Caymanhad also filed several affidavits in support of its applications against both Spark and2degrees.[7] On 7 February 2023 counsel for the plaintiffs narrowed the scope of thedocuments the plaintiffs were seeking from 2degrees. He then withdrew theapplication against 2degrees immediately before it was due to be heard on the morningof 8 February 2023.Relevant principles[8] Rule 8.21 of the High Court Rules 2016 governs the procedure to be usedwhere a party to a proceeding seeks particular discovery against a non-party. Wherethe Court makes an order under r 8.21 the costs regime set out in 8.22(3) applies. Thisprovides as follows:8.22 Costs of discovery(3) If an order is made under rule 8.20(2) or 8.21(2), the Judge may, if theJudge thinks it just, order the applicant to pay to the person fromwhom discovery is sought the whole or part of that person's expenses(including solicitor and client costs) incurred in relation to theapplication and in complying with any order made on the application.[9] The issue for the Court in the present context is therefore whether it is just tomake an order requiring the plaintiffs to pay the whole or part of 2degrees' legal costs.It does not matter that no order for discovery was ultimately made.1[10] The courts regularly make orders requiring a party to a proceeding to meet thereasonable legal costs incurred by a non-party in responding to an application for non-party discovery. This reflects the principle that non-parties have no stake or interestin the proceeding. They should not be put to unnecessary expense in providingassistance to those who have an interest in the outcome.[11] In AFI Management Ltd v Lepionka & Co Investments Ltd Fitzgerald Jobserved:Further, while costs are always at the discretion of the court, and assumingthe non-party's response to the application was reasonable, that party's(reasonable) actual costs ought to be met by the party seeking non-partydiscovery.[12] Where the Court finds costs claimed by a non-party to be unreasonable it willreduce them to a reasonable level.21 AFI Management Ltd v Lepionka & Co Investments Ltd [2018] NZHC 892 at [4].2 See eg Beaman v Robinson [2022] NZHC 3590 at [24].The arguments[13] On 2degrees' behalf Mr Skilton submits that 2degrees acted reasonably at alltimes in response to the plaintiffs' "broad and ill-defined application". He says that atno stage did counsel for the plaintiffs identify the issues in dispute based on thepleadings. Nor did he clearly articulate why the documents sought were relevant tothose issues. By way of example, Mr Skilton points out that the applications sought:(a) all internal documents in 2degrees' control "relevant to the Caymanmanagement rights", even though any internal consideration by2degrees of Spark's actions was not directly relevant to any issue indispute between Spark and Cayman, based on the pleadings; and(b) all external documents in 2degrees' control relevant to the "Caymanmanagement rights" irrespective of whether they were relevant to anissue in dispute or had already been discovered in the substantiveproceedings by Spark or provided by MBIE following Cayman'sOfficial Information Act request.(Counsel's emphasis)[14] Mr Skilton says he informed Mr Wigley. counsel for the plaintiffs, that hisclients' application was misconceived and ought to be withdrawn. He also submitsthat the plaintiffs acted in a manner that caused 2degrees' costs to escalate by:(a) combining the discrete non-party discovery application with thevarious discovery applications against Spark. Cayman continued tomaintain that its approach was appropriate even though 2degreesinformed Cayman that its approach exacerbated 2degrees' costs;(b) maintaining that all documents filed in relation to its applicationsagainst Spark were relevant to the non-party discovery application.Cayman even refused to identify which sections of the voluminousaffidavits and lengthy statement of claim were relevant to theapplication involving 2degrees. Instead, Cayman maintained that "alldocuments on the plaintiffs' applications including against Spark arerelevant to the applications against 2degrees, except for theapplication for Part 3 release;(c) rejecting 2degrees' without prejudice save as to costs offer.[15] Mr Skilton says the plaintiffs' approach required him to review the extensiveaffidavits filed in support of both applications as well as the lengthy pleadings in thesubstantive proceeding. It also required him to be present during the hearing of theapplications relating to Spark.[16] Mr Skilton also submits there would have been significant commercialramifications for 2degrees if the plaintiffs' application had succeeded. Many of thedocuments that the plaintiffs sought would have revealed 2degrees' decision-makingprocesses and its commercial priorities. These included management and boardreports, budgets, predictions and strategy papers. Such documents are highlyconfidential in a commercial setting and would have been revealed to Spark, one of2degrees' major competitors.[17] Furthermore, 2degrees took the view that it may be required to meet the costof any discovery exercise itself given that the plaintiffs are registered overseas anddeclined to provide security for costs. The plaintiffs also contended that costs shouldnot be determined until discovery had been completed because the discovery processmight reveal that 2degrees was implicated in breaches by Spark of the restrictive tradepractice provisions of the Commerce Act 1986. This meant 2degrees was required totake a careful and considered approach to protect its interests.[18] For the plaintiffs, Mr Wigley largely takes issue with the quantum claimed by2degrees. He points out that costs payable on a category 2B basis would amount toapproximately $5,500. Given that the scale is intended to reimburse a party forapproximately two thirds of actual costs he says actual costs should have been in thevicinity of $8,300. Mr Wigley points out that the sum claimed in the present case farexceeds the sums awarded in other cases where non-party discovery has been ordered.[19] Mr Wigley also submits the application for non-party discovery always had anarrow focus and that 2degrees could easily have triaged the documents relevant tothe application. He contends 2degrees has "belted and braced" its approach, asdemonstrated by the fact that Mr Skilton needlessly remained in Court on 7 February2023 whilst the applications relating to Spark were heard. He says the plaintiffs shouldnot be required to pay for 2degrees' "gold plated approach". He also submits thatissues relating to confidentiality did not need to be considered prior to the hearing.Decision[20] I consider the plaintiffs should reimburse 2degrees for the legal costs it hasincurred, and for the reasons Mr Skilton has advanced.[21] I do not consider the sums awarded in other non-party discovery cases provideany real assistance because of the complexity of the present case and the commercialramifications of the application for 2degrees. I consider it was entitled to take a "beltsand braces" approach given the fact that the orders the plaintiffs sought would haveresulted in confidential and commercially sensitive information being disclosed to oneof its major competitors. Furthermore, I do not accept the application was narrow infocus. The breadth of the documents the plaintiffs sought would have extended thescope of the enquiries Mr Skilton was required to make significantly.[22] 2degrees has actually incurred the costs for which it now seeks to bereimbursed as evidenced by the invoices attached to the affidavit filed in support of itsclaim. I do not consider the hourly rate Mr Skilton has charged to be unreasonableand Mr Wigley does not suggest this to be the case. Furthermore, given the scope ofthe issues Mr Skilton was required to confront I do not consider the time he spent onthe application to be excessive. I do not consider he can be criticised for remaining incourt whilst the applications involving Spark were heard because it gave him theopportunity to further understand the issues the substantive proceeding raises. Thiswas plainly relevant to the application for non-party discovery.[23] I therefore direct that the plaintiffs are to meet 2degrees' actual and reasonablelegal costs in responding to the application.[24] It is also appropriate to award costs on the memorandum filed by Mr Skiltonin support of the application for costs. I therefore award 2degrees costs on a Category2B basis for the memorandum together with a 50 per cent uplift.Lang J