SPARK NEW ZEALAND TRADING LIMITED v SPUD CONSULTING LIMITED NO 2 [2020] NZHC 1957

SPARK NEW ZEALAND TRADING LIMITED v SPUD CONSULTING LIMITED NO 2 [2020] NZHC 1957[6 August 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2018-404-2875[2020] NZHC 1957BETWEEN SPARK NEW ZEALAND TRADINGLIMITEDApplicantAND SPUD CONSULTING LIMITEDFirst RespondentAND MARK LESTERSecond RespondentCIV-2018-404-2876BETWEEN SPARK NEW ZEALAND TRADINGLIMITEDApplicantAND VICTORY I.T LIMITED (INLIQUIDATION)First RespondentAND SEAN DAVID BRYANSecond RespondentHearing: 5 August 2020Appearances: Z G Kennedy and Y J Lee for the applicantS M Kilian for the 2875 partiesB M Stainton and L M Tawse for the 2876 partiesDate of judgment: 6 August 2020JUDGMENT OF JAGOSE JThis judgment was delivered by me on 6 August 2020 at 12.00pm.Pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy Registrar[1] My 13 March 2020 judgment, reissued 25 June 2020,1 required the respondentspromptly to comply with this Court's prior discovery orders,2 made to assist in thetaking of evidence in arbitrations between the applicant ("Spark") and the respondents("Spud" and "Victory") respectively.3 The arbitrations resume hearing(s) next month.[2] I adjourned Spark's claims also for fines and costs against Spud and Victoryarising out of that non-compliance for subsequent determination. Subject to what I sayat [13] below, this is that determination. It requires to be read in conjunction with myearlier judgment. As I made plain then, Spud's and Victory's approaches to discoveryin this Court were "unwarranted".4[3] Spud's and Victory's approaches since have not been much better. Palmer J's5 August 2019 effectively default costs order against Spud remains outstanding (butShane Kilian said for Spud it will be paid within a few days). Spud's discoverablebank account records only were provided for inspection in recent days. For Spark, andwith the exception of recently identified invoices between Spud and Victory,Zane Kennedy accepted Spud's discovery now is complete.5 Spud's recent affidavitsremain unsworn in reliance on its director's contended inability to have their oathsadministered in Australia's Victoria, affected by measures to manage COVID-19'spresence in that community. Victory's director claims comprehensive loss of companydocuments during his self-reported but otherwise unevidenced ill-health. Victory nowbelatedly claims disproportionality in some 400 invoices already ordered discoverable,to discover instead a "sample" and to provide also a copy of a contended summary ofthe whole. But no application is made to vary the discovery orders,6 or my enforcement1 Spark New Zealand Trading Ltd v Spud Consulting Ltd [2020] NZHC 515.2 Spark New Zealand Trading Ltd v Victory I.T CIV-2018-404-2786, and Spark New ZealandTrading Ltd v Spud Consulting Ltd CIV-2018-404-2785, minute, 6 June 2019.3 Arbitration Act 1996, Sch 1, art 27.4 Spark New Zealand Trading Ltd v Spud Consulting Ltd, above n 1, at [5].5 Mr Killian advised he had "confirmed there were no other accounts held by Mr Lester, and MrLester himself has now clarified this position". Mr Lester's unsworn affidavit confirms "the bankaccounts listed in my previous affidavit are the only accounts I was using when in New Zealand".Those were bank accounts in the name of Spud Consulting Pty Limited, which statementsbelatedly now have been disclosed. After the hearing, Mr Kennedy filed a memorandum attachingextracts from those statements illustrating payments to "Mark Lester" or "Mark and Karen Lester"during the discovery period, some seemingly disbursing payments from Victory between Spudand Mr Lester. I cannot tell directly from the statements if they establish Mr Lester or Spud hasother accounts, but the sums are such as make it implausible the statements there record cashpayments. I address the consequences of that uncertainty at footnote 10 and [13] below.6 High Court Rules 2016, r 8.17.order, which therefore stand for Spud's (and Mr Lester's) and Victory's (andMr Bryan's) performance.[4] The respondents cannot rely on their continuing discovery obligation to excuseprior deficiencies. Rule 8.18 of the High Court Rules 2016 makes it plain the"continuing obligation to give discovery and offer inspection" persists beyond initialcompliance with the discovery orders, which neither Spud nor Victory had (or haveyet wholly) achieved. Neither can they rely on Spark's conditional acceptance of theirincomplete discovery, which was made without visibility of their additionaldiscoverable documents. In any event, compliant discovery remains the discoverer'sobligation;7 inter-party cooperation and agreement is dispositive only of process.8[5] Although the respondents poorly comprehended their discovery obligations,and their contended reasons for failures otherwise to comply are spurious or otherwiseinadequately are evidenced, there remains room for reasonable doubt the respondentsknowingly failed without reasonable excuse to comply with the orders.9 Thus,although by a relatively narrow margin, I am not prepared yet to hold the respondentsin contempt. There accordingly is no foundation for any fines liability.10[6] I turn to Spark's applications for costs. For the respondents' samecomprehensions and contentions as to discovery, I also am not prepared yet to holdthey are to be taken to have "ignored or disobeyed" this Court's orders so as to justifyindemnity costs.11 That is because their discovery conduct is not quite at the requisitelevel of impropriety – "rare cases generally entailing breach of confidence or flagrant7 High Court Rules 2016, rr 8.13–8.16.8 Rule 8.2(1).9 As now codified in the Contempt of Court Act 2019, s 16(3)(b). Compare Siemer v Stiassny [2008]1 NZLR 150 (CA) at [11].10 For present purposes, I leave aside Mr Kennedy's recent discovery of Spud's record of paymentsto Mr Lester. Given the seriousness of the allegation, I am not prepared to take it as evidence ofMr Lester's contempt or misconduct without his having an opportunity to respond. But, on itsface, Mr Lester's most recent affidavit risks being found an attempt to obtain judgment in his andSpud's favour by conscious and deliberate dishonesty; by fraud: Commissioner of Inland Revenuev Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1 NZLR 804 at [29]. I reserve leave toSpark to continue to press its contempt and indemnity costs application on such new evidence(together with that already filed) as it contends to meet the tests I have outlined at [5] and [6].11 High Court Rules 2016, r 14.6(4)(b).misconduct", of "very unreasonable" conduct"12 – although coming perilously close,especially by their continued non-compliance.[7] I have considered if the respondents' failure to abide by the arbitrator'sdiscovery orders – without "prospects of defence",13 or grounds for resistance on thepart of Spud,14 or engagement at all by Victory15 – offered "some other reason" tojustify indemnity costs "despite the principle that the determination of costs should bepredictable and expeditious".16 But my discretion relates to this proceeding.17My determination of costs on the present application is not to prevent the arbitrator,on any costs application before him, from concluding Spark may recover the balanceof its expenses in this proceeding (including on the present application) as indemnitycosts in the arbitration, for example, if incurred in the wake of the respondents ignoringor disobeying his discovery orders to the requisite standard. On the presentapplications, I only can consider costs of, or incidental to, or of steps in the presentproceedings.[8] There can be no argument the respondents have contributed unnecessarily tothe time and expense of these proceedings by failing, without reasonable justification,to comply with this Court's orders, justifying increased costs.18 Such unnecessarycontribution logically must be of steps not otherwise required to be taken in theproceedings, or materially in excess of the scale time allowed for each such step to theparty claiming costs, such being how costs usually are calculated.1912 Prebble v Awatere Huata (No 2) [2005] NZSC 18; 2 NZLR 467 at [6]; Bradbury v WestpacBanking Corporation [2009] NZCA 234; [2009] 3 NZLR 400 at [6] and [28]; Flujo Holdings PtyLtd v Merisant Company Inc [2018] NZCA 226 at [34]–[35].13 Spark New Zealand Trading Ltd v Spud Consulting Ltd CIV-2018-404-2785, and Spark NewZealand Trading Ltd v Victory I.T CIV-2018-404-2786, minute, 14 February 2019.14 Spark New Zealand Trading Ltd, above n 2, at [2].15 At [4].16 High Court Rules 2016, r 14.6(4)(f).17 Rules 14.1 and 14.2.18 High Court Rules 2016, r 14.6(3)(b)(i) and/or (iv) and/or (d). HCR 14.6(3)(b)(i) inferentially mustexclude those matters specified in subpara (iv), for which "reasonable justification" may afford aground for resistance.19 High Court Rules 2016, r 14.2(1)(c); see both r 14.6(3)(a) and Holdfast NZ Ltd v Selleys Pty Ltd(2005) 17 PRNZ 897 (CA) at [43]–[44].[9] Spark bears the burden of establishing such qualification:20 "[c]lear cause mustbe shown to justify an increase".21 It has established to my satisfaction the entirety ofthese proceedings, including on the present applications, has been brought about bythe respondents' failures to comply with, first, the arbitrator's discovery orders. It allwas not required. And that remains the case on the present applications through theirfailures to comply with Brewer J's, Toogood J's, or Palmer J's discovery and costsorders, or my enforcement order.[10] By 'increased costs' is meant an uplift from scale, the Court of Appealaccepting the uplift "logically" should not be more than 50 per cent.22 Given my'entirety' point in the previous paragraph, that is the uplift I will apply to the costs towhich Spark is entitled on this application.[11] For Victory, Lydia Tawse argues for refusal of, or reduction in, costs on accountof Victory's set-off "success" on the application,23 established by my refusal to setaside the respondents' claims to confidentiality. That is not a justifiablecharacterisation of my judgment, which expressly identified the real issue then beforeme was "if the restrictions proposed to protect that claimed confidentiality arewarranted",24 and determined that solidly in Spark's favour.25[12] I mean no disrespect in saying this proceeding appears only "of averagecomplexity requiring counsel of skill and experience considered average in the HighCourt".26 However, I do not know what time allocations here are claimed on thepresent application for what steps. From my observation of the Court file, acomparatively small amount of time is unlikely to be considered reasonable for any ofthem; and a comparatively large amount of time may be considered reasonable forsome of them.27 None seems likely substantially to exceed the time allocated under20 Corrick v Silich [2018] NZCA 221, (2018) 24 PRNZ 210 at [60].21 Bradbury v Westpac Banking Corp, above n 12, at [28].22 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [46]–[48].23 High Court Rules 2016, r 14.7.24 Spark New Zealand Trading Ltd v Spud Consulting Ltd, above n 1, at [4].25 At [5].26 High Court Rules 2016, r 14.3(1).27 Rule 14.5(2).band C.28 Those particularly appear the case in respect of Spark's steps taken on thepresent applications. I would allow also for second counsel.[13] If Spark seeks to take up my reservation of leave to it,29 this judgment servesonly as an interim result. Nonetheless, compliance remains required with all extantorders. Otherwise Spark should file and serve a single-page table – setting out anycontended allowable steps, time allocation, and daily recovery rate – to finalise myaward of costs. I will not entertain any response seeking to revisit anything I havedecided in this or my prior judgment. Given those decisions, parties may be able toagree the table's content.[14] I therefore direct Spark to file and serve such documents as it elects withinfive working days of the date of this judgment, with any response and reply to be filedwithin two working day intervals after service.—Jagose JCounsel/Solicitors:Z G Kennedy Barrister, AucklandMinterEllisonRuddWatts, AucklandKilian & Associates, AucklandStainton Chellew, Auckland28 Rule 14.6(3)(a).29 At n 10 above.