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Smith v Air New Zealand Ltd [2006] NZHRRT 13 (4 April 2006)

Last Updated: 6 April 2006

Decision No. 13/06

Reference No. HRRT 37/02

BETWEEN VALERIE JOAN SMITH

Plaintiff

AND AIR NEW ZEALAND LIMITED

Defendant

BEFORE THE HUMAN RIGHTS REVIEW TRIBUNAL

Mr R D C Hindle Chairperson
Mr G J Cook Member
Ms P A K McDonald Member

SUBMISSIONS RECEIVED FROM:

Mr R M Hesketh for the plaintiff.
Mr A H Waalkens QC for the defendant.

DATE OF DECISION: 4 April 2006

DECISION REGARDING COSTS

Preliminary

[1]	As a result of our decision on the substantive issues in this case (see Smith v Air New Zealand, HRRT Decision 30/05; 22 September 2005), the defendant has applied for an award of costs under s.92L(1) of the Human Rights Act 1993 (‘the Act’). The application is opposed.

[2]	The memoranda that have since been exchanged to deal with the issue of costs raise a number of specific issues, which we will deal with in the order in which they have been raised. Before doing so, however, we make a general assessment of the costs situation.

General assessment

[3]	The defendant submits that it is prima facie entitled to an award of costs, having ultimately been the successful party: see, e.g., Commerce Commission v Southern Cross Medical Care Society [2003] NZCA 248; [2004] 1 NZLR 491.

[4]

As we will explain, one of the matters raised by the plaintiff in reply is that she was at least as successful as the defendant, because the Tribunal found in her favour on the issue of whether or not the manner in which she was treated was contrary to s.44(1)(b) of the Act. In his submission Mr Hesketh made it clear that the reason the plaintiff was not inclined to seek costs for herself was that this has been treated as a ‘test case’. He added, however, that if we were to conclude either that the case was not a test case, or that costs should be awarded to the defendant notwithstanding the nature of the case, then he would want to make further submissions on the point.

[5]

The submission filed on behalf of the defendant had, however, made it clear that the defendant was arguing that, even if this was a ‘test’ case, costs should nonetheless be awarded to the defendant. In the circumstances Mr Hesketh was invited to file any further submissions thought to be relevant. In early February 2006 he made it clear, however, that he did not wish to do so. The result is that the only questions we have to determine are whether costs should be awarded in favour of the defendant and, if so, what the quantum of the award should be.

[6]

We were informed that the total costs incurred by the defendant amounted to well in excess of $60,000 plus disbursements. No detail was given in respect to the legal costs, but invoices were produced to establish that the costs of two of the witnesses who gave evidence for the defendant were just over $20,000. It was submitted that, applying the District Court Schedule of costs on the basis that this was a complex matter, an award of at least $27,445 would have been indicated (this assessment excludes the sum of $1,500 that has already been fixed in this proceeding: see Smith v Air New Zealand HRRT Decision 23/03, 24 June 2003 at para’s [36] to [42]). It was also submitted that each step has required more time than would normally be expected (indicating an even higher award), and that if the High Court Scale of Costs were to be applied then the result would again be very much greater.

[7]	On this basis Mr Waalkens invited us to make an award of $40,000 as a contribution to the costs actually incurred by the defendant.

[8]

Reference to the costs schedules that apply in each of the District Court and the High Court are, of course, no more than a guide. Indeed it seems to us that this case demonstrates that it would be wrong to apply either the District Court Schedule or the High Court Scale to matters in our jurisdiction in a mechanical way. The nature and complexity of the issues raised in this case were never in any real proportion to the comparatively small amount of money that was at stake.

[9]	The Tribunal’s obligation under s.92L of the Act is to make such an award of costs as it thinks fit, at least having regard to the matters set out at s.92L(2) namely:

[a] The extent to which any party to the proceedings has participated in good faith in the process of information gathering by the Human Rights Commission;

[b] The extent to which any party has facilitated or obstructed that process; and/or

[c] The extent to which any party has acted in a manner that facilitated the resolution of the issues that were the subject of the proceedings.

[10]

Of these, we do not have enough information to make any assessment concerning [a] or [b]. There was no evidence on those topics, and so we take it that the way in which the parties participated in the process of information gathering (which, it ought be noted, relates to the process carried out by the Human Rights Commission not the Director of Human Rights Proceedings) can be approached as having been neutral when it comes to the costs assessment. But the question of the extent to which the parties acted in a manner that might have facilitated resolution – at least after the proceedings were commenced – was very much in issue. We will deal with that under the heading ‘Costs warnings’ below.

[11]

Although the assessment of costs in any given case is a matter for the Tribunal’s discretion, there is obviously a need for appropriate consistency between awards. The minority decision of the Chairperson of the Tribunal in Anderson v Claymore Management Ltd & Barclay (HRRT Decision 31/05; 1 November 2005) contains an analysis of a number of recent costs awards in the Tribunal. We assess this case to have been at the complex end of the spectrum of matters that come before us, and we think it proper to recognise that the level of preparation required would have been greater than for many other cases. In our view this case justified the appointment of two counsel to appear at the hearing. Putting aside the argument concerning preliminary procedural issues, the substantive hearing itself lasted for four days. That was followed by a process (that was implemented at the request of counsel for the plaintiff) in which the argument was transcribed so as to allow counsel an opportunity to consider whether and to what extent what had been said at the hearing ought be supplemented. Further written submissions were then filed. That process can only have added to the costs incurred by the defendant.

[12]

In the circumstances, such indications as we have concerning the actual level of costs that were incurred by the defendant do not seem to us to be unreasonable. We also agree with Mr Waalkens that the most that the defendant can reasonably expect is an award that represents a reasonable contribution to costs. Save for the specific matters we deal with below, there is no suggestion that the claim was not responsibly put forward, or that it was not properly pursued, or that there has been any other conduct either by the defendant to disqualify it from an award (or to reduce any award that might otherwise be made) or by the plaintiff to justify an increase in any award.

[13]

It was common ground that, because of s.92C(4) of the Act, any award we make against the plaintiff will in reality be payable by the Director of Human Rights Proceedings. For reasons canvassed in decisions like Horne v Bryant (HRRT Decision 36/03, 18 December 2003) and in the Chairperson’s minority decision on costs in Anderson v Claymore Management & Barclay (supra), however, we do not see that as making any decisive difference to the assessment of costs in this particular case. On the other hand we bear in mind the observations of the High Court in its decision in Claymore Management Ltd v Anderson (Unreported, High Court, Auckland, CIV 2002-404-95 AP 33-SW02, 2 September 2003 per Priestly,J) at para’s [38] to [40] to the effect that some weight can be given to the fact that the Director’s office is publicly funded, and that he has only limited resources with which to represent litigants.

[14]	Putting aside the three matters that we deal with below, we would:

[a] Accept the argument for the defendant that, since it was ultimately the successful party, it is entitled to an award of costs;

[b] Fix the costs for all steps in the proceeding which have not been encompassed within the costs award made in our decision of 24 June 2003 (i.e., including the preparation and filing of pleadings, attendances from time to time at telephone conferences and in connection with other interlocutory steps, preparation for and attendance at the hearing, this present application for costs and all incidental costs and disbursements in connection with the litigation howsoever arising) at $22,500; and

[c] Direct that the award of $1,500.00 already made in respect of the decision concerning preliminary issues is now payable by the plaintiff to the defendant in addition to the award at sub-paragraph [b] above.

[15]	Against that background, we turn to consider the three matters that assumed greatest significance in the submissions concerning costs.

Part success only?

[16]

Mr Hesketh submits that it is too simplistic to regard the defendant as the successful party in the litigation. He places emphasis on the fact that the defendant failed to persuade the Tribunal that there was no prima facie liability under s.44(1) of the Act. This was a significant point, as the Tribunal’s decision shows.

[17]

Both counsel referred us to passages extracted from correspondence that had passed between them before the hearing. It seems to have been common ground that the real battle would be fought out in respect of the s.52 defence: in his submission Mr Waalkens said that "From the outset the case has been one primarily about s.52 and whether Air New Zealand in providing the service in question could not reasonably be expected to provide it without the more onerous terms that were bestowed upon Mrs Smith and other passengers" (we take that to mean, and other passengers like her).

[18]

Mr Waalkens submitted, however, that it would be unrealistic to ‘sever’ different parts of the case and conclude that the plaintiff is entitled to credit in the costs assessment because she did win a part of the argument. In his submission it was clear from the outset that the claim would have to overcome the s.52 hurdle, that it has failed to do so, and that that is the event that costs should follow.

[19]

Mr Hesketh’s response is that the plaintiff ought not to have been put to the cost and effort of establishing that the case crossed the s.44(1) threshold. He submitted that evidence and argument about s.44(1) took up a considerable part of the hearing and, although he recognised that the defendant was within its rights to have the issue tested, he says that it must now live with the consequences of having done so unsuccessfully.

[20]

We agree with Mr Hesketh on this point. If the defendant ever had any reservations about what its prospects for success on the s.44(1) issue were, we were given no inkling of them. The issue was taken, and contested fully and vigorously for the defendant. It occupied a significant part of the time taken in evidence and in argument. Even now (and contrary to the impression that the issue was never very important that is conveyed by the defendant’s costs submissions) the point is still alive, since it has been raised for re-consideration in the High Court by the defendant’s notice of cross appeal.

[21]	We have no doubt that if it the s44(1) issue had been conceded the hearing would have taken considerably less time. It would certainly have been less complex.

[22]

Taking a broad view of matters, however, we do not think that the s.44(1) issue should be regarded as having been equivalent to half of the case. The plaintiff failed not only on the s.52 defence, but also in respect of the issues regarding staff training that she had raised. And, even if the case had been refined to the s.52 issues only, it would still have been necessary for the defendant to incur a considerable part of the costs that were incurred to provide the relevant background information.

[23]	All in all, we consider that the fact that the defendant was unsuccessful on the s.44(1) issue justifies a reduction in the costs that we would otherwise have awarded in respect of the substantive hearing by one third.

Test case

[24]

The second issue concerns the nature of the case. In his submissions, Mr Waalkens argued that there were relevant authorities from other jurisdictions, although overall he accepted that the issues had not previously been considered in New Zealand. But we stand by what we said in our substantive decision, namely that the case was clearly brought by the plaintiff to test the defendant’s practices in regard to the provision of facilities for disabled people; more accurately, people having the same kind of disability as the plaintiff. The Director of Human Rights Proceedings represented her. Any review of our decision will show the extent to which the case raised issues that had not previously been the subject of decision in the specific context of the New Zealand legislation. We have no doubt that the case was a ‘test’ case.

[25]	Should that make any difference to the assessment of costs?

[26]

Mr Hesketh submits that it makes a very great deal of difference. He referred us to a number of authorities in support of the proposition that costs should not be awarded (or are not awarded) in ‘test’ cases: see Birkdale Service Station Ltd v CIR [2000] NZCA 325; [2001] 1 NZLR 293; Bayer v Police (unreported, Auckland High Court, AP 238/90, 11 April 1991 per Anderson J; Barrycourt Motel & Tourist Flats v Mitchell [1996] 2 NZLR 676; Securities Commission v Kiwi Co-operative Dairies Ltd [1995] 3 NZLR 26; Basile v Atwill [1995] 2 NZLR 537; Machinery Movers Ltd v Auckland Regional Council [1994] 1 NZLR 492; and Donovan v Cockburn [1963] NZLR 322. He also drew our attention to the observation of Hammond, J in Attorney-General v Udompun [2005] NZCA 128; [2005] 3 NZLR 204 that:

"There is some indication in the case law that although, generally speaking, to date Courts have tended to assert that merely because litigation is of a ‘public interest’ or ‘test case’ variety that is not a licence to depart from the ‘usual’ regime for costs, where there is a government (or governmental agency) involved in a case involving fundamental human rights, that may be a circumstance to alter the usual exercise of a costs discretion (see Ahnee v Director of Public Prosecutions [1999] UKPC 11; [1999] 2 WLR 1305 at p 1315 (PC) , per Lord Steyn and Nuredine v Minister for Immigration and Multicultural Affairs [1999] FCA 1130; (1999) 91 FCR 138 at p 145)" [para 224].

[27]

The argument for the defendant is that, whether or not a case can be labelled ‘a test case’ that should not, in or of itself, make a difference to the assessment of costs. Where a party wants to have an issue ‘tested’ for his, her or its own reasons then it should substantially bear the costs. In this case the defendant wanted no part of the litigation and was not in any way seeking to ‘test’ the points brought forward by the plaintiff. To the contrary, there were several warnings given by the defendant before the hearing about costs, and in any event since the claims included a claim for damages the case should be seen as having been brought by the plaintiff for personal gain. Mr Waalkens referred in particular to the following passage from McGechan’s commentary to the High Court Rules (at para 46.14):

"Where a proceeding raises a novel issue necessitating additional preparation and argument, it is suggested that the successful party should be awarded ‘normal’ costs but the unsuccessful party should not be visited with the higher costs burden resulting from the novelty. In International Factors Marine (Singapore) Pte Ltd v The Ship ‘Komtek II’ [1988] 2 NZLR 108; (1998) 11 PRNZ 466, Potter J made no order as to costs, this despite giving a substantial (summary) judgment against the defendant, on the basis that this has been in the nature of a test case. It is respectfully suggested that that approach lacks both logic and fairness ... "

[28]

Our own assessment of the authorities we were referred to is that, in the end, they do no more than confirm the most basic underlying proposition that each case must depend on its own facts. To simply label a case as a ‘test’ case and, on that basis, to determine that costs ought not be awarded seems to us to oversimplify the analysis that ought to be brought to bear when it comes to assessing costs. Each case has it own dynamic.

[29]

We can certainly envisage circumstances in which litigation might be pursued by willing parties for the very reason that they wish to have a definitive ruling to inform their future behaviour, and that in those situations it would be wrong to award costs one way or another. Perhaps the fact that one or other of the parties is a governmental agency, or that human rights issues are involved, will be far more influential aspects of the consideration in other cases. But in this case we have already taken some account of the fact that the Office of the Director of Human Rights Proceedings is publicly funded, and that he has limited resources with which to represent litigants (see para [13] above). That seems to us to meet the circumstances of this case sufficiently. And in any event we consider that it is at least as important in the balancing exercise in this case that the defendant did not share the plaintiff’s interest in the litigation for the sake of any precedent it might set; to the contrary, the defendant neither sought the proceedings out nor wished them to continue. Indeed the evidence established that it had earlier set up a working group to consult with interested parties in the hope of finding ways to meet the concerns of people in the position of the plaintiff through consultation and debate.

[30]

The reality is that the defendant has been put to the cost of the litigation, and the plaintiff was not successful in obtaining the outcome she was looking for. We are not persuaded that there is anything in the factors at work in this case to justify a decision to refuse costs, or even to discount them any further, under this heading.

Costs warnings

[31]	It seems to be accepted that the following communications were sent by counsel for the defendant to counsel for the plaintiff, and that it is appropriate for us to be made aware of them:

[a] "I realise that inevitably the views brought to litigation very often reflect the opposite sides of the same coin. Having said that I do wonder at the efficacy (both from a practical as well as a technical point of view) of what Mrs Smith is claiming. This will be expensive litigation and already there has been a costs order made against her. The short point, I guess, is that if you wanted to explore abandoning this matter then I would be quite willing to encourage this!" (letter dated 13 August ‘2005’; from the context we take this to have been written in 2003);

[b] "You were going to check with Mrs Smith as to whether this matter was capable of settlement. As I have indicated (without prejudice save as to costs) I am sure we will be able to come to some arrangement with regard to settling the financial aspect of the case. Rather the declarations that she is seeking is the particular part of the case that causes problems from the point of view of settlement. The ramifications of the declarations being sought must be obvious and I completely agree with Air New Zealand’s stance that it cannot be in a position to agree to those declarations ..." (email on or about 17 March 2004, repeating earlier telephone discussion);

[c] An open offer of settlement by payment of $3,500 to the plaintiff with a denial of liability, made by letter dated 24 April 2004.

[32]

We regard the first of these as being too vague to make any difference in the assessment of post –hearing costs. It is an overture for settlement, certainly, but it does not really tell us anything about what the defendant might have been willing to do at that time. We do, however, have some sympathy for the defendant with regards the second of these communications. It was clearly made on a ‘without prejudice save as to costs’ basis, and it draws attention to the impossibly wide-ranging relief sought by the plaintiff in her claim. That was also a matter of concern to us when we heard the case: see para’s [58] to [62] of the substantive decision. The third communication also seems to us to be somewhat relevant to the present costs issue, although it must have been obvious throughout that the plaintiff saw the case as raising issues of principle that went beyond her personal position, or any assessment of what it might take to compensate her for what she had experienced.

[33]

The plaintiff’s answer to this part of the argument is twofold. First, Mr Hesketh submits that the costs warnings must be evaluated against the reality that the defendant consistently refused to accept that s.44(1) was engaged – with a result that the analysis under s.52 was not even reached. Secondly, Mr Hesketh argued that the ‘public interest/test case’ nature of the issues in this case displace any significance that might otherwise have attached to these communications in any event.

[34]

In our assessment the costs warnings we were referred to neither add nor detract in any significant way from the quantum of costs we should award. Certainly it is clear with hindsight that the plaintiff would have been better off financially if she had accepted the $3,500 offered in April 2004, and that all parties would have been spared the costs of litigation that followed. On the other hand, as long as the defendant was unwilling to agree that s.44(1) was engaged then realistically what was effectively a nominal payment of that kind was never going to be likely to resolve this case on its own. Equally, as long as the plaintiff was looking to have orders or an agreed statement along the lines of the terms in which the statement of claim was drawn, then it was never likely that the defendant would have been willing to settle the case.

[35]	The communications we have been referred to do not leave us with any clear sense that the plaintiff ought so clearly to have accepted what was on offer that it is appropriate to increase the costs that we have otherwise assessed as reasonable in the circumstances.

Conclusion

[36]	For the foregoing reasons:

[a] We direct that the award of costs made in our decision dated 24 June 2003 in the sum of $1,500.00 is now payable to the defendant;

[b] In addition, and pursuant to s.92L of the Act, we direct that costs of and incidental to the balance of this litigation are to be paid to the defendant in the sum of $15,000.

_______________ _______________ _______________
Mr R D C Hindle Ms P A K McDonald Mr G J Cook
Chairperson Member Member