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

[2011] NZEmpC 9


ARC 87/10

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

Naturex Limited
Kate Rogers

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.

The issues were: whether costs should be awarded under c118 of sch3 Employment Relations Act 2000 “ERA” (Provisions having effect in relation to Employment Court — withdrawal of proceedings) and whether costs could be awarded for mediation expenses.

Held: The Court had a discretion to award costs in cases where there had been a withdrawal of proceedings pursuant to c118 of sch3 Employment Relations Act 2000 “ERA”. Although no breakdown showing how the time claimed was made up, it was clear that a significant portion of R's claim was based on the time incurred by her solicitor and counsel in relation to mediation and settlement attendances. The primary principle in relation to an award of costs was the costs followed the event which essentially meant that they were awarded to the successful party. With mediation however, there was no successful party; rather it was a structured process whereby the parties strove to bring the dispute to a negotiated end. While costs involved in preparing for an appearance at mediation were costs of the proceedings, parties owed it to each other to put some resource towards a genuine endeavour by way of mediation, to settle the dispute. The prospect of an award for costs for mediation might encourage parties to reach a resolution there were practical difficulties for the Court, such as r68(2)(b) Employment Court Regulations 2000 (discretion as to costs — Court may not have regard to anything that was done in the course of the provision of mediation services).

It was not appropriate to award costs on account of mediation and settlement attendances. However R was entitled to costs relating to a judicial teleconference and in connection with preparation and filing of her application for costs.



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.


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.


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.


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.


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

    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.

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.


Mr Drake referred to Trotter v Telecom Corporation of New Zealand Ltd3 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)


Mr Drake submitted that the present case could “be distinguished from Real Cool Ltd v Gunfield4 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.”


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 Unions5 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.”

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.”


In a final memorandum, Mr Drake submitted:

The defendant's remark that “the...

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