NATUREX Ltd v KATE ROGERS NZEmpC AK

JurisdictionNew Zealand
JudgeA D Ford
Judgment Date10 February 2011
CourtEmployment Court
Docket NumberARC 87/10
Date10 February 2011

In The Matter of a challenge to a determination of the Employment Relations Authority

BETWEEN
Naturex Limited
Plaintiff
and
Kate Rogers
Defendant

[2011] NZEmpC 9

ARC 87/10

IN THE EMPLOYMENT COURT AUCKLAND

Costs decision relating to a withdrawal of a challenge to a determination of the Employment Relations Authority which dismissed the plaintiff's claim to enforce a restraint of trade clause — defendant claimed costs up to the filing of the discontinuance and related mainly to mediation and settlement negotiations — whether costs should be awarded under c118 of sch3 Employment Relations Act 2000 (withdrawal of proceedings) — whether costs could be awarded for mediation expenses.

COSTS JUDGMENT OF JUDGE A D Ford

Issues
1

On 4 August 2010 the plaintiff filed a challenge to a determination of the Employment Relations Authority (the Authority) seeking a hearing de novo. Twenty days later it filed a Notice of Discontinuance. On 6 September 2010 the defendant filed an application for costs. The plaintiff accepts that the Court has a discretion to award costs where there has been a withdrawal of a claim but it submits that in the particular circumstances of this case, where no statement of defence had been filed by the defendant, there should be no award of costs or expenses.

2

The defendant alleges that the discontinuance was an acknowledgement that the challenge should never have been filed and she seeks an award of $2868.55 which she claims is two thirds of the actual costs and expenses she incurred within the 20 day period prior to the filing of the discontinuance.

3

The bulk of the claim is made up of costs allegedly incurred in connection with mediation and settlement negotiations. The principal issue, therefore, is whether it is appropriate in awarding costs to allow for such attendances.

Submissions
4

The challenge related to a determination 1 of the Authority dated 12 July 2010 rejecting an application by the plaintiff to enforce a restraint of trade provision against the defendant, a former employee of the plaintiff's franchise holder. The Authority found that the plaintiff had no proprietary interest to be protected and that, therefore, the restraint of trade provision was not enforceable.

5

In his written application seeking costs Mr Pool, on behalf of the defendant, submitted:

  • 4. The defendant has incurred costs of $4302.88 (incl GST) as a result of the challenge.

  • 5. The defendant's costs were incurred as follows:

    • (i) Roger Pool, solicitor-$3,459.13 (incl GST) @ $250 plus GST per hour, including: Telephone and email advice to client re challenge and settlement options, meeting with Kensington Swan re settlement options, instructions to S Dench, Employment Court telephone conference, advice to client, email offer to Kensington Swan, preparation and attendance at mediation, costs and incidental attendances.

    • (ii) Simon Dench, barrister-$843.75 (incl GST) @ $375 plus GST per hour, including: telephone advice in relation to options and Kensington Swan “stay” letter, telephone advice in relation to settlement, drafting proposed settlement terms and related follow up; liaison in relation to mediation, telephone advice in relation to costs in the Court, various incidental attendances.

  • 6. The defendant seeks an award of two thirds of these costs; namely $2,868.55 in accordance with the normal rule. The plaintiff issued the challenge, put the defendant to the above expense completely unnecessarily and simply discontinued the proceeding. This did not occur pursuant to any agreement and the discontinuance is an acknowledgement that the challenge should never have been filed.

6

In response, Mr Drake submitted that in terms of step one of the “two-step approach” outlined by the Court of Appeal in Binnie v Pacific Health Ltd, 2 “the defendant's costs were not reasonably incurred.” Mr Drake acknowledged the general principle that costs should follow the event and be awarded to the successful party but he submitted that there “has been no “event” in this matter.” Specifically he noted that the defendant's costs breakdown did not include drafting documents in preparation for the proceedings; that no documents had been filed in Court by the defendant and that the proceedings had been discontinued before the defendant had incurred the cost of preparing and filing a statement of defence.

7

Mr Drake referred to Trotter v Telecom Corporation of New Zealand Ltd 3 as authority for the proposition that “costs of mediation could not be claimed because they were not costs of the actual proceedings and because parties owed it to each other to put some resources towards a genuine endeavour by way of mediation to settle a dispute.” (emphasis added)

8

Mr Drake submitted that the present case could “be distinguished from Real Cool Ltd v Gunfield 4 where the Court held that it is appropriate to include mediation costs when parties are directed to mediation.” Counsel advised that in the present case there had been no direction from the Court in relation to mediation: “Rather, the parties agreed between themselves during a teleconference with the Court on 17 August 2010 that they would endeavour to settle the dispute by way of mediation.”

9

Referring to step two in Binnie, namely, as counsel explained it, “after making an appraisal of all the relevant factors, decide at what level it is reasonable for the losing party to contribute”, Mr Drake referred to NZ Air Lines Pilots Assn IUOW v Registrar of Unions 5 where the Court discussed the principles applicable in awarding costs and submitted that in reference to those principles, the plaintiff in the present case had not “unnecessarily or unreasonably added to the costs of the defendant” in that the claim was withdrawn “following a mediation which settled

the substantive problem between the parties” and the plaintiff's claim was “genuine and not frivolous or vexatious.”
10

In reply, Mr Pool submitted that there was “no settlement” reached in mediation nor subsequent to mediation. He claimed that “the defendant's costs, including mediation, were incurred in the context of and as a result of the challenge proceedings” and he submitted that “mediation that occurs in the context of challenge proceedings can be distinguished from mediation that occurs prior to proceedings in the Employment Relations Authority.”

11

In a final memorandum, Mr Drake submitted:

The defendant's remark that “the defendant is unable to discern any basis on which a settlement might be alleged” is disingenuous. The parties agreed that the plaintiff would immediately file a notice of discontinuance withdrawing its proceedings, which it did. The only outstanding issue between the parties was costs in the Employment Relations Authority, which have now been resolved by a determination of the Authority dated 22 September 2010. 6

12

Mr Drake submitted that there was no distinction between mediation that occurs in the context of challenge proceedings and mediation that occurs prior to proceedings in the Authority.

13

In a minute issued on 17 August 2010, following a teleconference that morning, Chief Judge Colgan noted that the restraint which was the subject of the proceeding was due to expire on 16 October 2010 which meant that even if a reasonably prompt fixture were allocated, it would be only shortly before the expiry of the restraint that the injunction proceedings sought to enforce. The minute then recorded:

3. The matter has been left on the following basis. The Registry will keep in reserve for this case the fixture dates of 14 and 15 September 2010. There will be a further telephone conference call with counsel at 9 am on Tuesday 24 August 2010. In the meantime, Mr Drake will attempt to arrange an urgent mediation or...

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