Abrahams v Milburn
[2017] VCC 229
•16 March 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-14-03271
| Ezra Abrahams Pty Ltd (A.C.N. 091 698 958) | Plaintiff |
| v | |
| Vanessa Renee Milburn | Defendant |
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JUDGE: | Millane | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 February 2017 | |
DATE OF RULING: | 16 March 2017 | |
CASE MAY BE CITED AS: | Abrahams v Milburn | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 229 | |
RULING ON COSTS
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Subject: Commercial law
Catchwords: COSTS – breach of compromise – breach of duty of confidence – application to re-open case unsuccessful - defendant’s submission of no case to answer upheld – unopposed application for award costs of proceedings against both plaintiff and plaintiff as trustee of The Ezra & Rachel Abrahams Family Trust – opposed application for costs on indemnity basis from 3 dates – whether court should exercise its discretion – whether unreasonable for the plaintiff to reject without prejudice or Calderbank offers – certification of two counsel
Legislation Cited: County Court Act 1958; County Court Civil Procedure Rules 2008
Cases Cited:Calderbank v Calderbank [1976] Fam 93; Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; Aquaculture Corp v New Zealand Green Mussel Co Ltd [1990] 3 NZLR 299; Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298
Judgment: Orders for payment of defendant’s costs, including on an indemnity basis from 26 January 2017. Certification for two counsel.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D. Aghion | Kliger Lawyers |
| For the Defendant | Mr I. Upjohn QC and Ms S. Kelly | Mann Lawyers |
HER HONOUR:
Introduction
1 By a Writ and Statement of Claim filed in the County Court on 8 July 2014, the plaintiff company, Ezra Abrahams Pty Ltd, sought damages, including aggravated and exemplary damages, alternatively equitable compensation, from former employee, the defendant, Vanessa Renee Milburn. The plaintiff company alleged breach of an agreement made between the parties to compromise an earlier proceeding filed in the Supreme Court of Victoria by the plaintiff company against the defendant on 23 February 2011 and, further or in the alternative, the plaintiff company alleged breach of a duty of confidence owed by the defendant to maintain the confidence to which she agreed.
2 It was alleged in the Supreme Court proceeding that, shortly before resigning, and in breach of her retainer, and, further or in the alternative, in breach of a duty of confidence owed to her employer, the defendant had, without authority, accessed and downloaded computer files containing confidential information belonging to the plaintiff company (the Supreme Court proceeding).[1] The meaning attributed to ‘confidential information’ in paragraph 5 of the Writ and Statement of Claim filed in the Supreme Court proceeding was adopted in the compromise agreement and in the County Court proceeding.
[1]Exhibit P1
3 It was not contested that, in June 2011, a business competitor, Whygo Video Conferencing Pty Ltd commenced proceedings in the Supreme Court against the plaintiff company in which Whygo relied on the confidential information to allege that the plaintiff company had breached a duty of confidence owed to Whygo. The Whygo proceeding was settled on 25 June 2012.
4 By paragraphs 17 and 22 of the Statement of Claim in the County Court proceeding, the plaintiff company particularised the alleged loss and damage suffered by reason of the defendant’s alleged breach of the compromise agreement and a duty of confidence respectively as: “Legal costs incurred in defending the Whygo proceeding, in the sum of $90,300 excluding GST” and “Loss of use of money”.
5 By paragraph 17 of the Amended Defence filed in September 2014, the defendant clearly put in issue whether the plaintiff company had sustained the loss as claimed:
17. She denies each and every allegation in paragraph 17 and further says that:
(a) the legal costs of defending the Whygo proceeding was the consequence of:
(i) the Plaintiff’s own wrongful and unlawful conduct which pre-dated the Whygo proceeding;
(ii) Whygo’s decision to sue the Plaintiff;
(b) the legal costs of defending the Whygo proceeding were those of the Plaintiff and also of Ezra Abrahams.
6 By paragraph 6 of the Reply filed in December 2014 the plaintiff company denied any wrongful or unlawful conduct and asserted “that the legal costs of the proceeding were paid by the plaintiff”. As we now know the plaintiff company was not in a position to prove that the loss as claimed had been sustained by it as at the date of the trial.
7 A further claim for aggravated and exemplary damages for breach of the compromise agreement, pleaded in paragraphs 18 and 19 of the Statement of Claim in the County Court proceeding was denied by the defendant, albeit without raising any point of law. The claim was pleaded in the following terms:
18. Further, Ms Milburn breached the compromise agreement in circumstances where:
18.1. Ms Milburn was required to give and did give an undertaking to Abrahams Co as a term of the compromise agreement;
18.2. the giving of an undertaking is a serious matter;
18.3. the breach was deliberate; and
18.4. the breach was calculated to expose Abrahams Co to litigation by Whygo.
19. By reason thereof, Ms Milburn acted in a high-handed and contumelious manner, thereby entitling Abrahams Co to aggravated and exemplary damages from her.
8 The trial of the County Court proceeding commenced before me on 24 January 2017.
9 An agreed List of Issues for Determination handed by the parties to the Court in opening relevantly asked the Court to determine: if the defendant’s breach caused Whygo to commence the Whygo proceeding, did such breach cause loss and damage to the plaintiff company and what was the quantum of such loss and damage; and to further determine whether exemplary or aggravated damages were available for a breach of the terms of the compromise agreement?[2]
[2]At paragraphs 1(i) and 2(a) respectively.
10 In opening, counsel for the plaintiff company, Ms Ruddle, informed the Court that the claim was for $125,000 in legal fees and for exemplary damages, the latter “on account of the high-handed and contumelious disregard the plaintiff had for her obligations” .[3] In addition to explaining the defendant’s defence, the defendant’s senior counsel, Mr Upjohn QC relevantly confirmed that the defendant would submit that a claim for aggravated and exemplary damages was not available for a breach of contract or breach of confidence as a matter of law.
[3]Transcript (TN) 18.
11 Ezra Abrahams was the only witness called by the plaintiff company. Two days into the trial, counsel for the plaintiff company, Ms Ruddle closed its case. A submission of no case to answer was notified the same afternoon by Mr Upjohn.
12 On 2 February 2017, I dismissed an application by the plaintiff company to re-open its case. On 24 February 2017, I delivered written reasons for having so ordered and for upholding the defendant’s submission of no case to answer.
13 I indicated to the parties my intention to dismiss the plaintiff’s proceeding. Instead, for reasons that will become apparent shortly, by agreement with the parties I made orders the effect of which was to strike out the proceeding with a right of reinstatement to the defendant to make any non-party costs application within 60 days of the date on which taxation of costs ordered was completed, or the parties otherwise agreed on the quantum of such costs, (whichever first occurred) and to dismiss the proceeding unless such application was made within the time specified.
14 I heard the defendant’s application for costs on 24 February 2017. Having first reserved the right to make submissions on the weight to be given to Exhibit NAP-11, no objection was taken to the filing of a supporting affidavit (including 14 exhibits), sworn on 22 February 2017 by the defendant’s solicitor, Nadav Prawer. Junior counsel, Ms Kelly handed up a written submission and addressed the Court on the defendant’s submissions. Mr Aghion of counsel appeared for the plaintiff company.
15 I do not propose to repeat here in detail background and evidentiary matters addressed in my earlier rulings.
16 The defendant sought orders that:
a) the plaintiff company pay the defendant’s costs of and incidental to the proceeding, including any reserve costs. This order was not opposed;
b) Ezra Abrahams Pty Ltd as trustee of The Ezra & Rachel Abrahams Family Trust (the Trustee) pay the defendant’s costs of and incidental to the proceeding. This order was not opposed;
c) the liability of each of the plaintiff company and Ezra Abrahams Pty Ltd as trustee of The Ezra & Rachel Abrahams Family Trust be joint and several. This order was not opposed;
d) the cost payable be taxed on a standard basis up to and including 24 December 2015. This order was not opposed;
e) the costs payable be taxed on an indemnity basis on and from 24 December 2015. This order was opposed;
f) the Court certify for two counsel. This order was opposed;
g) there be leave to the defendant to file any non-party costs application within 60 days of the date on which taxation of any costs ordered is completed or the parties agree the quantum of costs, whichever occurs first. As mentioned, this order was not opposed.
The plaintiff company and The Ezra & Rachel Abrahams Family Trust
17 It is convenient to explain the basis for making the orders sought under paragraphs 10 (a), (b), (c) and (f) first.
18 By paragraphs 1.1 and 1.2 of the Statement of Claim the plaintiff company alleged that it is and was at all material times incorporated pursuant to law and further that it conducted and at all material times had conducted a video conferencing business. These facts were not contested in the defendant’s pleadings prior to the trial commencing.
19 However, evidence given by Mr Abrahams, both in evidence-in-chief and under cross-examination combined with the results of searches conducted and enquiries made by Mr Prawer between the commencement of the trial on 24 January 2017 and 2 February 2017, no doubt raised questions about, among other things, the plaintiff company’s capacity to sue for the loss and damage alleged in its own right.
20 In evidence-in-chief Mr Abrahams confirmed, among other things, that he was the sole director and the secretary of the plaintiff company, which since 1997, had operated a business, the Video Conferencing Centre providing ‘video conferencing services, which include room rentals and call connections and videoconferencing related advice.’[4]
[4]Transcript (TN) 33-34.
21 Various documents relating to alleged payment by the plaintiff company of legal fees incurred in the Whygo proceeding, were tendered through Mr Abrahams. Allowing for the description of the documents in the tender process and from later inspection of these, the documents comprised: a bundle of invoices for the professional fees of solicitors defending the Whygo proceeding, Weinberg Lawyers;[5] an extract from The Videoconferencing Centre’s Account Transaction record for the period 7 July 2011 to 9 July 2012, recording monies paid to the Weinberg trust account;[6] copies of tax invoices from the company, STOPline Pty Ltd addressed to Weinberg Lawyers and said to have been paid by the plaintiff company;[7] an extract from The Videoconferencing Centre’s Account Transactions (Accrual) record for the period 7 July 2011 to 9 July 2012 recording payment of the STOPline invoices;[8] copy of tax invoice addressed to Weinberg Lawyers for payment of half of a mediator’s fee, with a receipt for claim for payment of that fee from a solicitor’s trust account, the former said to have been paid the plaintiff company;[9] copies of tax invoices for barristers’ fees addressed to Weinberg Lawyers;[10] an extract from The Videoconferencing Centre’s Account Transactions (Accrual) record for the period 7 July 2011 to 9 July 2012 (said to be an extract from the plaintiff company’s account transaction record) recording payments made to counsel on account of bills paid in the Whygo proceeding;[11] and copies of tax invoices for barristers fees addressed to Weinberg Lawyers in the Whygo proceeding and said to have been paid by the plaintiff company.[12]
[5]Exhibit P8.
[6]Exhibit P9.
[7]Exhibit P10.
[8]Exhibit P11.
[9]Exhibit P12.
[10]Exhibit P13.
[11]Exhibit P14.
[12]Exhibit P15.
22 Under cross-examination on 25 January 2017, Mr Abrahams gave evidence to the following effect: [13]
[13]See TN 176-177 and 203-204.
Ø the plaintiff company was the trustee of The Ezra & Rachel Abrahams Family Trust (the Trust);
Ø the Trust traded as The Videoconferencing Centre;
Ø the plaintiff company operated banking and financial accounts in its own right and as trustee of the Trust;
Ø the debts for legal fees (as shown in copy bank statements and records contained in the plaintiff company’s Court Book) and claimed by the plaintiff company in the Statement of Claim, were incurred in the plaintiff company’s own right;
Ø the legal fees and expenses totalling $125,688.50, for the period from 7 July 2011 to 9 July 2012 and listed in a spreadsheet, Exhibit D10, were paid using the accounts of three entities: the plaintiff company’s business account (B45-49 and B55), a personal account (R30 and R31) and the Trust’s account (V2-43-55);[14]
[14]Exhibit D10.
Ø where those debts had been paid by the Trust they were eventually repaid by the plaintiff company;
Ø the plaintiff company maintained loan accounts, which were “tallied off against company income and things like that”.
23 The affidavit relevantly established the following matters:
Ø At approximately 8:45 AM, prior to the commencement of the trial on 24 January 2017, Mr Prawer received an email from the plaintiff company’s solicitors containing a revised Court Book index and additional documents for inclusion in the Court Book.
Ø Pages 345-355 of the plaintiff company’s Court Book contained a series of redacted bank records in the name of ‘EZRA ABRAHAMS P/L ATF EZRA & RACHEL ABRAHAMS FAM TRUST T/A THE VIDEOCNF CNTR’.[15]
[15]These pages are included in the documents comprising Exhibit D12 and described at tender as copy bank records for the plaintiff company trust account.
Ø Information obtained from the Australian Securities and Investment Commission’s (ASIC) database on 24 January 2017 which:
a) recorded an Australian Company Number (ACN) – 091 698 958 – for the plaintiff company;
b) identified Mr Ezra Abrahams as the plaintiff company’s sole director, its secretary and the holder of two fully paid-up shares with an issued share capital of $2;
c) identified the plaintiff company’s principal place of business at 5 Erindale Avenue, Ripponlea; and
d) indicated that the plaintiff company did not have an Australian Business Number (ABN).
Ø A further search of ASIC’s database seeking both current and historical data conducted at 12:23 PM on 25 January 2017, revealed that the plaintiff company had never held an ABN.
Ø A search of the Australian Government Business Register found no business names for video conferencing registered to the plaintiff company. The search, nonetheless, revealed that in Victoria the entity, ‘THE TRUSTEE FOR THE EZRA AND RACHEL ABRAHAMS FAMILY TRUST’ traded as trustee for ‘THE VIDEOCONFERENCING CENTRE” and, unlike the plaintiff company, the Family Trust held an active ABN: 47 159 191 804. The search further identified that the ABN and trading name had been active since 1 July 2007.
24 On 31 January 2017, prior to delivery of the ruling on the plaintiff company’s application to re-open its case, Mr Prawer wrote to Kliger Partners, the solicitors acting for the plaintiff company in the County Court proceeding, seeking informal discovery or production of various documents: the Trust deed for the Trust; the record of appointment of trustee (if any); tax returns for both the plaintiff company and the Trust for the years 2012 to 2014 inclusive; and records of loan agreements, loan accounts and repayments between the plaintiff company and the Trust “in relation to the alleged loans from the Trust to its trustee for or in relation to legal fees and disbursements connected to the Whygo proceeding”. Allowing for the evidence called so far, Mr Prawer concluded, in my view with good reason, that the documents requested were relevant to determining the actual loss suffered by the plaintiff company and the liability of the defendant for loss, if any, should the application to re-open the plaintiff company’s case be successful.
25 In response, on 2 February 2017, counsel for the plaintiff company provided by way of informal discovery, documents comprising copy tax invoices and receipts for the fees of Mr Aghion of counsel as well as a copy of a private ruling obtained from the Australian Taxation Office (ATO) for the Trustee for The Ezra & Rachel Abrahams Family Trust. The private ruling, dated 25 July 2016, responded in the affirmative to an application made on 30 June 2016 asking whether a deduction was allowable for legal expenses incurred in the years ending 30 June 2015, 2016 and 2017.
26 The relevant facts and circumstances upon which the private ruling was based, were said to be that the Trust operated a business and sought to claim a tax deduction for an amount of “approximately $100,000 being the legal costs that were expended by the Trust in defending the legal action taken against the Trust by the competitor that was not recoverable from the now de-registered competitor”, having “(o)n 8 July 2014…. issued a writ against the former employee. The employee had undertaken not to pass on confidential information to any person, but nonetheless did so. The competitor used the confidential information that it received from the employee to form the basis of their claim”. Clearly the competitor to which the private ruling referred was Whygo, whereas the legal actions referenced the Whygo proceeding and the County Court proceeding.
27 As such, the application for the private ruling demonstrated that, notwithstanding the matters pleaded in 2014 and Mr Abrahams’ evidence at trial, in mid-2016 it had been represented to the ATO that the Trust had incurred the costs of the Whygo proceeding and had initiated the County Court proceeding.
28 A further request Mr Prawer deposed was made by letter on 2 February 2017 for discovery of loan records, records of repayments or other relevant documents relating to the Trust, was unanswered as at the time of swearing the affidavit on 22 February 2017. Otherwise, on 10 February 2017 Mr Prawer received from the plaintiff company’s solicitors an email containing: a letter bearing the same date; a copy of the Trust deed stamped 15 March 2000; and a number of documents described in the correspondence as “ledger accounts for the Video Conferencing Centre between the period 1 November 2011 to 25 May 2012 showing the internal transfer of payments to the Weinberg trust account via personal account number 1078-40456 (known as R30 & R 31 in the bank statements)”.
29 Notably, none of the documents produced (or tendered) evidenced repayment of loans made by the Trust to the plaintiff company. The documents produced by the plaintiff company’s solicitors in February 2017 bore the heading ‘The Videoconferencing Centre’ and were extracted from Account Transactions [Accrual] records. As stated by Mr Prawer, the transactions referenced in these records show that a total of $12,570 was credited to an account described as the ‘EA Loan Account’. The sum of $12,570 was also recorded as having been paid to the Weinberg trust. This payment is reconcilable with the personal account entries recorded in the spreadsheet prepared by the plaintiff company, Exhibit D10. As mentioned, this spreadsheet showed payments totalling $125,688.50 Mr Abrahams said were made by three entities between 7 July 2011 and 9 July 2012.
30 At close of the plaintiff company’s case on 25 January 2017, based on the evidence called, a number of matters relating to the quantum of the claim for fees paid in defence of the Whygo proceeding and to proof of the plaintiff company’s actual loss remained unclear.
31 Importantly, perusal of supporting documentation, such as the V2 Plus statements and transaction records for the Trust account comprising Exhibit D12, as well as the various invoices and records comprising Exhibits P8, P9, P11, P14, D9 and D11, indicated that, without more, the plaintiff company could not have established payment beyond an amount of $35,800 entered in the spreadsheet (Exhibit D10) or that by reference to the documentary evidence, the amounts so entered were paid for the legal costs of the Whygo proceeding.
32 The letter from the plaintiff company’s solicitors accompanying the documents informed Mr Prawer that the plaintiff company was not in a position to provide tax return documents because it did not have a tax file number and did not lodge tax returns. In short, the plaintiff company did not and does not earn income.
33 As Ms Kelly submitted, it was apparent from the matters summarised above that the plaintiff company does not trade, conduct a business or hold property in the jurisdiction from which a costs order could be satisfied. [16] The plaintiff company was, however, the trustee of the Trust trading as The Video Conferencing Centre and appears to have treated itself as being indistinguishable from the Trust, including in relation to its taxation affairs. It follows that, despite Mr Abrahams’ evidence to the effect that the plaintiff company had incurred legal fees paid in defending the Whygo proceeding, the plaintiff company could not have owned the confidential information, the subject of the claim made in the County Court proceeding, other than in its capacity as trustee of the Trust.
[16]See also the results of the further search conducted on 24 February 2017, Exhibit D14.
34 In short, the plaintiff company had no standing to defend the Whygo proceeding or commence the County Court proceeding other than in its capacity as trustee of the Trust.
35 As mentioned, the application for a cost order to be made against both the plaintiff company and the plaintiff company as trustee of the Trust was not resisted. I was satisfied that, in the circumstances described, orders for the costs of and incidental to the proceeding, including any reserve costs should be made against both the plaintiff company and the plaintiff company as trustee of the Trust and that the liability of each entity should be joint and several.
36 The matters summarised above also provided some explanation for the defendant seeking to preserve an opportunity to apply for a non-party costs order against Mr Abrahams in the future should any costs order not be recoverable against the plaintiff company and/or the Trust. It was conceded that such an application, if mounted, would not be without its difficulties, particularly in view of the indication from Ms Kelly that, the defendant might yet seek to persuade a court to consider the conduct of Mr Abrahams at mediation of this matter, notwithstanding the requirements of section 47B of the County Court Act 1958.
37 The approach proposed by the defendant also had the advantage of saving the time and cost involved in hearing the defendant’s further application, before any costs order was satisfied or not as the case may be.
38 In the circumstances described, I was satisfied that this was an appropriate case within which to leave open an opportunity to make an application for non-party costs within the time specified. As mentioned, the order granting leave to the defendant to file any non-party costs application within 60 days of the date on which taxation of any costs ordered is completed or the parties agree the quantum of costs, whichever first occurs, was not opposed.
39 It was common ground that the question for the Court was whether, in all the circumstances of this case, the Court should exercise its discretion to award costs against the plaintiff company and the trustee. The defendant’s success in this proceeding entitled her to an order for costs on the basis sought in paragraph 10 (d) above. Again, the plaintiff company did not resist an order for costs payable to be taxed on a standard basis up to and including 24 December 2015. The orders made reflect this.
The opposed application for costs to be taxed on an indemnity basis
40 The defendant sought costs on an indemnity basis on and from three dates: 24 December 2015, 26 January 2017 and 6 February 2017. Written offers of settlement had been conveyed to the plaintiff company on or prior to these dates.
41 Orders 26 and 27 of the County Court Rules of Civil Procedure provide a mechanism for making a written offer of compromise under Rule 26.02 and in accordance with Rule 27.02 to 27.04. An offer served in accordance with the Rules differs from an informal or without prejudice offer, which is commonly referred to as a “Calderbank” offer after the decision of the Court of Appeal in England in Calderbankv Calderbank.[17]
[17][1976] Fam 93.
42 The three offers made in writing in the present case were not served in accordance with the Rules. Each offer was made on a “without prejudice” basis, although only two of the offers made were expressed to be made as a Calderbank offer.
43 The decision of the Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2)[18] contains discussion of the principles applied in the exercise of a court’s discretion to award costs on an indemnity basis. It provides a non-exhaustive list of guidelines for determining whether a Calderbank offer was unreasonably rejected:
[18](2005) 13 VR 435.
Ø There is no presumption that party should pay indemnity costs if rejection of a Calderbank offer leads to a less favourable result. Rather rejection of a Calderbank offer is a matter which the court should have regard to when considering to order indemnity costs.[19]
[19]Ibid. [18]-[20].
Ø An order for special costs should only be made in special circumstances. The objective of not discouraging litigants from bringing their dispute to court, is as important as the policy objectives underlying the availability indemnity costs where a Calderbank offer has been made (ie saving private and public costs and indemnifying a party who has made an offer of compromise later found to have been reasonable).[20]
[20]Ibid. [21[-[22].
Ø The test is one of reasonableness. It is an objective test, the critical question being whether, at the date of the offer, it’s rejection was unreasonable in the circumstances.[21]
[21]Ibid. [20]-[24].
Ø The exercise of the discretion in respect to costs must take into account all relevant considerations. Whilst not an exhaustive list, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard to at least the following matters:
a) the stage of the proceeding at which the offer was received;
b) the time allowed to the offeree to consider the offer;
c) the extent of the compromise offered;
d) the offeree’s prospects of success, assessed at the date of the offer;
e) the clarity with which the terms of the offer were expressed;
f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.[22]
Ø There is no general rule that the maker of a Calderbank offer will not be entitled costs unless the offer sets out, with some reasonable specificity the basis for the contention that the offeree should accept the compromise. Whether there is a need for the offeror to descend to specificity as to why the offer should be accepted will depend upon a consideration of all of the circumstances existing at the time of the offer.[23]
[22]Ibid. [25].
[23]Ibid. [26]-[27].
44 The question in this case was whether, in all the circumstances of this case, I should exercise my discretion to award costs against both the plaintiff company, and the plaintiff company in its capacity as trustee of The Ezra & Rachel Abrahams Family Trust, on an indemnity basis from any and if so which of the above-mentioned dates? As the approach outlined in Hazeldene’s Chicken Farm shows, whether or not each offer was unreasonably rejected must be evaluated in the context of the circumstances existing when the offer was rejected.
Indemnity costs from 24 December 2015
45 An offer to settle was made by the defendant’s former solicitors, Gadens Lawyers by letter dated 23 December 2015 emailed on the same date to the plaintiff company’s solicitors. The letter carried the heading “WITHOUT PREJUDICE SAVE AS TO COSTS”. The substance of the letter read as follows:
We are instructed to offer to settle this proceeding on the basis that our client pay your client the sum of $25,000 inclusive of interest and costs (whether ordered or otherwise) in full and final settlement of all claims the subject of the Proceeding.
The settlement sum will be payable within 14 days the parties exchanging executed counterparts of an agreed deed of release (the Offer).
If the Offer is not accepted, our client will be required to consider her position with respect to joining Mr Korman as a party to this Proceeding and waving privilege over those communications with Mr Korman in your client’s previous Supreme Court proceeding with Whygo Pty Ltd.
Clearly, if she does so, the matter will not be in a position to proceed to trial on 3 February 2016 as
· Mr Korman will need to be joined as a third party to the Proceeding with appropriate accommodation made for the filing of his defence and compliance with other interlocutory steps;
· further discovery and inspection will need to be made by our client post waiver of privilege over those communications in which it is waived,
· the parties have not yet mediated in accordance with the Court’s Order dated 9 December 2014.
Our client would be prepared to waive privilege over those communications as a prerequisite of settlement if this is something your client desired.
If you agree that the matter should not proceed on 3 February 2016, we would be pleased to make an application to vacate the hearing date whilst your client considers this Offer.
In such a case, please advise how long your client needs to properly consider this Offer.
Either way, our view is that the Court should be notified of the need to vacate as a matter of priority.
If you have any questions in relation to this Offer, please contact…
46 Without more, in his affidavit, Mr Prawer deposed that the Offer was rejected by the plaintiff company on 24 December 2015.
47 By way of background, Mr Korman was the defendant’s counsel in the Supreme Court proceeding. In the current proceeding it was alleged, among other things, that between 19 May 2011 and 7 June 2011 the defendant gave a copy of the confidential information to Mr Korman; asserted to Mr Korman that by giving the confidential information to him this was no longer her property and that she no longer had possession custody or control over the confidential information; instructed Mr Korman to give a copy of the confidential information to Whygo Video Conferencing Pty Ltd; and through the agency of her counsel, Mr Korman, gave a copy of the confidential information to the competitor, Whygo.[24]
[24]Paragraphs 10.1 to 10.4 inclusive of the plaintiff company's Statement of Claim
48 By an Amended Defence filed in September 2014, the defendant alleged, among other things, that after 6 May 2011 but prior to 19 May 2011 she gave Mr Korman “certain documents and computer data” which she alleged was confidential to Whygo, not the plaintiff company. It was conceded that, during the same period, the defendant asserted to Mr Korman that the “said information” was at the time of delivery his property and that she no longer had any possession, custody or control over it, nor would she have any claims against her in respect of his use of such data and, further, that the defendant authorised Mr Korman to make the “said information” available to Whygo.[25]
[25]Paragraphs 10 and 11 of the Amended Defence.
49 What was not and, has never been, conceded by the defendant (or established on the evidence called prior to closing the plaintiff company’s case), was that in the period alleged (or at an earlier time), Mr Korman gave a copy of the confidential information (as defined in the Supreme Court proceeding) and received from the defendant to Whygo, or that the confidential information (as defined in the Supreme Court proceeding) received from the defendant’s agent in the period alleged (or at an earlier time) was a cause of the competitor, Whygo, issuing the Whygo proceeding against the plaintiff company in the Supreme Court.
50 Whilst it was conceded that the Offer was not made “expressly” in accordance with requirements of a Calderbank offer, relying on the approached articulated by the Court of Appeal in Hazeldene’s Chicken Farm, Ms Kelly, nonetheless, submitted that the refusal of the Offer was, in all the circumstances, unreasonable and costs should be awarded on an indemnity basis from 24 December 2015. In this regard, the factors Ms Kelly sought to emphasise included the likely motivation of the plaintiff company in refusing the Offer and that the Offer reflected a genuine and commercial compromise made shortly prior to the trial date.
51 Having heard argument from both sides, I was not satisfied that in all the circumstances the rejection of the Offer was unreasonable.
52 As the letter shows, at the time the Offer was made, the proceeding was not ready for trial, notwithstanding the imminent trial date. Mediation had not occurred in accordance with orders made by the Court and the third party proceeding against Whygo (The First Third Party) had stalled. Inspection of the Court file shows that, during a directions hearing on 30 October 2015, Ms Ruddle informed the Judicial Registrar that Whygo, the First Third Party had been deregistered on 28 January 2015. Furthermore, undiscovered information relating to communications between the defendant and her agent, Mr Korman, likely relevant to both the claim and the defence was pending.
53 There was no evidence that the plaintiff company had previously sought access to communications between the defendant and Mr Korman, as for example, by non-party discovery. However, as the letter acknowledged, the additional information was information for which a claim for privilege could be made.
54 Importantly, the defendant was then contemplating a further third party proceeding. This process and the process of making additional discovery would have necessitated an order to vacate the trial date as soon as possible after the summer vacation.
55 The Offer was an all-in offer on a claim for a fixed sum. Whilst the Offer provided no breakdown of the amount payable, it appears to have involved an element of compromise through the payment of money by the defendant.
56 Ms Kelly submitted that when looked at in its true context, the Offer of $25,000 inclusive of interest and costs (whether ordered or otherwise) represented a commercial attempt to resolve the proceeding in circumstances where there was no evidence of any earlier offer of compromise and where, at the time the Offer was made, the plaintiff company would not have been able to prove the quantum of its loss, alternatively it would have known that the amounts referrable to payments made by the plaintiff company represented less than half the jurisdictional limit of the Magistrates’ Court.
57 In summary, at the time the Offer was made in December 2015, the plaintiff company knew which of the three entities (the plaintiff company, the Trust or Mr Abrahams) had incurred the losses. It follows that the plaintiff company must have known that it would not be able to prove loss and damage incurred by the Trust. Alternatively, the plaintiff company must have known that the claim by the plaintiff company should have been brought in the Magistrates’ Court, because the amounts paid from accounts controlled by the plaintiff company represented less than one-half of the jurisdictional limit of $100,000 in the civil jurisdiction of the Magistrates’ Court at the time the proceeding commenced in July 2014.[26] I understood this to be the case, irrespective of whether the loss claimed was $90,000 as alleged in the Statement of Claim or $125,000, as opened by counsel on the first day of hearing.
[26]Rules 63A.24 and 63A.25 of the County Court Civil Procedure Rules 2008.
58 My earlier discussion of the concerns relating to proof of quantum and proof that the plaintiff company paid the legal fees in defending the Whygo action and the results of various searches made by Mr Prawer (albeit more than a year after the Offer was made), lend support to these submissions.
59 I would add here that, in view of the matters revealed by those searches, in December 2015, at the very least, the plaintiff company understood that it did not trade or operate the video conferencing business in its own right and that the accounts of the Trust had been used to pay most of the amounts the plaintiff company sought to attribute to legal costs it allegedly incurred in defending the Whygo proceeding.
60 That said, as was submitted by Mr Aghion, whilst the amount and time for payment of the Offer were clear, overall the offer lacked clarity. The “carrot” was the sum offered but, somewhat unusually, the “stick” was that the defendant would move to join a third party, which would result in disclosure of communications between the defendant and her agent that were clearly relevant to an assessment of the merits of the claim and the defence.
61 As expressed, the Offer contemplated that the additional information could be made available to the plaintiff company as a prerequisite to settlement discussions or through a third party proceeding initiated by the defendant. Either way, the plaintiff company stood to gain from access to the privileged communications for the purpose of weighing the pros and cons of the offer made or prosecuting its claim.
62 The Offer did not expressly provide for a time for consideration and acceptance. In my view, the request that the plaintiff company state how long it needed to properly consider the Offer could not overcome the inherent uncertainty underlying the time available within which to accept an offer in the form it was made on Christmas eve.
63 As mentioned, the plaintiff company’s motivation for commencing and continuing the proceeding without, to that time, having made any offer to compromise the claim, was also said to be a relevant factor in assessing whether the refusal of the Offer was reasonable. It was, counsel submitted, the type of case that ought to have resolved, absent other factors being in play, which in this case flowed from the breakdown of the relationship between Mr Abrahams and his former business partner, Dr Daniel Lanzer.
64 Dr Lanzer was not a party to the County Court proceeding, although the particulars subjoined to paragraph 16 of the Statement of Claim reference an email allegedly written by Mr Matthews of Whygo in which Mr Matthews indicated that had it not been for the defendant, Dr Lanzer and Mr Korman, he would not have known what Ezra Abrahams and the defendant were doing and he (Whygo) would never have been able to make a claim against the plaintiff company.
65 In opening the plaintiff company’s case in support of the claim for aggravated and exemplary damages, Ms Ruddle explained that the business known as Video Conference Centre or VCC was previously run by Mr Abrahams in partnership with Dr Lanzer. The partnership had been dissolved with some “significant bitterness” in 2007 and, it was said by counsel, that Dr Lanzer had a “guiding hand” in the defendant’s high-handed and contumelious behaviour and, further, that the defendant had taken on “Dr Lanzer’s vendetta, his hatred and wanted the plaintiff company to pay. That was what she set out to do and that is what happened”.[27]
[27]TN 6, 12 and 18.
66 Mr Abrahams took up this matter in evidence-in-chief when he confirmed that the “bad blood” with his former business partner arising out of the termination of their partnership continued to the present time.
67 Notably, none of these matters were pleaded. Faced with an objection to the relevance of a line of questioning counsel submitted was intended to establish the defendant’s motive, Ms Ruddle explained that the evidence of Dr Lanzer’s role and the defendant’s motivation for acting as she did were relevant to the question of exemplary damages.
68 As this exchange took place during evidence-in-chief, it was convenient to allow counsel to pursue this line of questioning, subject to the requirement that in final submissions counsel demonstrate the relevance of the defendant’s motive to any issue the Court was required to determine on the pleadings, particularly on the question of exemplary damages.
69 For the purpose of the costs application, Ms Kelly submitted that, in the context of a money claim for a fixed sum of money, the matters raised in opening and pursued in evidence-in-chief, whilst not pleaded and ultimately irrelevant to establishing any fact in issue, nonetheless provided a motive to run the proceedings at all costs.
70 Ms Kelly also relied on a letter dated 3 January 2017 from the plaintiff company’s solicitors and addressed to Ms Milburn, for whom Gadens Lawyers had ceased to act from December 2016.[28]
[28]Exhibit D15.
71 The letter referred to discovery and paragraph 5 of the Third Party Notice,[29] which was said to indicate that Dr Daniel Lanzer was an active participant in “the transaction the subject of this litigation”. The letter reminded the defendant that by reason of her high-handed or contumelious conduct, the plaintiff company considered itself entitled to exemplary damages and gave notice as follows:
It seems clear that Dr Lanzer played some significant part in that behaviour and should you fail to call him to provide an explanation of your conduct, we put you on notice that we will ask the Court to draw an inference that his evidence would not assist you. In so doing, we rely on the rules set out in the case of Jones v Dunkel (1959) 101 CLR 298.
We will produce this letter to the Court at the appropriate time, should an issue regarding whether or not the inference should be drawn on whether you understood the necessity to call Dr Lanzer.
[29]The letter does not indicate which of the two Third Party Notices filed in this proceeding.
72 I have already mentioned the fate of the First Third Party proceeding.
73 The Third Party Notice to Mr Korman, a copy of which was tendered by Mr Aghion, was filed in March 2016. Whilst paragraph 5 of the document does not contain any allegation or particulars relating to Dr Lanzer’s conduct,[30] the particulars subjoined to paragraph 13 of the Third Party Statement of Claim reference email correspondence between Mr Korman and the defendant in which Dr Lanzer is mentioned.
[30]Exhibit P18.
74 The point to be made at this juncture is that, the third party proceedings were no longer before the Court. As mentioned, in 2015, the First Third Party, Whygo had been deregistered and by, either November or December 2016, the third party proceedings involving Mr Korman (the Second Third Party) had been resolved and discontinued.
75 Mr Aghion, nonetheless, submitted that the outstanding question of exemplary damages established a proper forensic basis for the statements made in the letter dated 3 January 2017 and for the matters on which Ms Ruddle opened the plaintiff company’s case on 24 January 2017. The exemplary damages claim was not, he submitted, as hopeless as the defendant would have it be viewed.
76 In this regard Mr Aghion handed to the Court an extract from Halsbury’s Laws of Australia together with two cases; a decision of the Court of Appeal of Wellington in New Zealand, AquacultureCorpvNew Zealand Green Mussel Co Ltd[31] and a decision of the Court of Appeal of New South Wales, Harrisv DigitalPulsePty Ltd.[32]
[31][1990] 3 NZLR 299.
[32](2003) 56 NSWLR 298.
77 The decision in Aquaculture establishes that exemplary damages are actionable in New Zealand in a claim for breach of confidence. By a majority of 2:1, the decision in Harris establishes that there was no power in the Supreme Court of New South Wales to make a punitive monetary award for breach of a fiduciary duty where that duty arose in the context of a contractual relationship. In Harris the employer sued an employee for breach of an express term of the employment contract that the employee would not compete with his corporate employer during his employment.
78 Mr Aghion’s submissions were twofold. Firstly, the Statement of Claim he drafted contained an “error of layout, but no more than that”, in that paragraphs 18 and 19, which followed the claim made for loss and damage by reason of the defendant’s breach of the compromise agreement in paragraph 17, properly belonged after paragraph 22. The latter paragraph made the breach of confidence claim.[33]
[33]TN 366.
79 Secondly, whilst acknowledging that the law does not recognise a claim for exemplary damages arising from breach of contract, Mr Aghion submitted that, had this matter required determination, the plaintiff company would have relied on the New Zealand authority, which recognises that exemplary damages are actionable in a claim for breach of confidence. The plaintiff company would have argued (so the submission went) that its claim was distinguishable from the claim rejected by the Court of Appeal in Harris, on the basis that the fiduciary duty owed by the defendant in the present case did not stem from a contract of employment.
80 Whilst it is unnecessary to determine any claim for exemplary damages arising from an alleged breach of confidence, for the purposes of the costs claim, I concluded that at the time the offer was made, the prospects of success of a claim for exemplary damages were low. Firstly, as mentioned, the case was opened by Ms Ruddle on the basis that exemplary damages were claimable for breach of contract and breach of a duty of confidence. Secondly, despite the challenge mounted by Mr Upjohn in his opening, the plaintiff company had not amended the pleading to make a claim for exemplary damages arising from breach of a duty of confidence (and not as pleaded, arising from a breach of contract) and, lastly, as I understood the case before the Court, the breach of the duty of confidence was said to have arisen out of the breach of the terms of the compromise agreement.
81 The short point to make at this juncture is that, if as submitted by Mr Aghion, there was scope to argue that exemplary damages are actionable in a Victorian court for a breach of confidence claim, this claim was never properly pleaded and, as such, could not have justified the statement made in January 2017 about the operation of the rule in Jones v Dunkel.
82 As Ms Kelly submitted, firstly, the letter misstated the operation of the rule in Jones v Dunkel as the pleadings had not put Dr Lanzer’s conduct in issue and, secondly, where the plaintiff company appeared intent on exposing what it perceived to be Dr Lanzer’s role, the letter gave support to the defendant’s contention that the plaintiff company had an ulterior motive for not acting to resolve the legal dispute earlier.
83 Nevertheless, whilst I accept that the undisguised antipathy Mr Abrahams bore towards Dr Lanzer and the defendant may have been a factor in the plaintiff company’s decision to reject the Offer in December 2015, on balance, I could not be satisfied that this factor somehow overrode other matters, such as a belief held at the time by the plaintiff company and its solicitors (well-founded or not) that the plaintiff could prosecute a claim for exemplary damages arising from breach of contract and, also at the time, the arguably reasonable proposition that in all the circumstances it was not imprudent for the plaintiff company to avail itself of the opportunity offered to access and analyse the import of hitherto privileged communications, before committing to any proposal for settlement.
84 Finally, it was acknowledged that the letter had not expressly foreshadowed an application for indemnity costs if the Offer was refused or stated the time from which such an order might be sought. These matters notwithstanding, Ms Kelly submitted that the plaintiff company’s solicitors would have clearly understood from the heading to the letter that the Offer was made without prejudice “save as to a submission we might make as to cost”.[34] The submission made did not, however, also address the implications of the failure to state the time from which an order for indemnity costs might be sought.
[34]TN 384.
85 Having regard to the overall lack of clarity in the terms of the Offer, the absence of a clear timeframe within which to accept the Offer and from which indemnity costs might be sought and the existence of, as yet, undisclosed information relevant to an evaluation of the claim and defence, I concluded that, when viewed objectively, the rejection of the Offer was reasonable.
86 That said, once the plaintiff company had called it’s evidence and closed its case on 25 January 2017, the considerations relating to quantum, the standing of the plaintiff company to bring this claim, the ownership of the confidential information (as defined in the Supreme Court proceeding) and the claim for exemplary damages, acquired greater significance in evaluating whether refusal of the further offers to settle was unreasonable.
Indemnity costs from 26 January 2017
87 By letter dated 25 January 2017 (said to have been sent and received on Thursday, 26 January 2017) a further “WITHOUT PREJUDICE SAVE AS TO COSTS” offer of settlement was made, on this occasion by the defendant’s current solicitors, Mann Lawyers (the second Offer).[35]
[35]Exhibit NAP-12 to the affidavit of Mr Prawer.
88 Allowing for the Australia Day holiday, the proceeding was adjourned to Friday, 27 January 2017. The second Offer was said to have been sent to the defendant solicitors at 11:36 AM on 26 January 2017. It was not contested that the second Offer was a Calderbank offer.
89 The letter set out the background to the making of the second Offer and the basis for contending that the plaintiff should accept the second Offer:
Ø the submission of no case to answer articulated in detail in counsel’s written submissions was pending;
Ø the defendant estimated her cost to date to be in excess of $200,000;
Ø in the defendant’s opinion, even if the Court dismissed the submission of no case to answer, the proceeding would be dismissed due to deficiencies in the plaintiff company’s case arising from the failure to tender the Writ and Statement of Claim in the Whygo proceeding;
Ø in the defendant’s opinion, if the proceeding was dismissed on either basis she would be entitled costs on an indemnity basis and the plaintiff company would face the prospect of a substantial costs order made against it, as well as the further costs of the remainder of the trial;
Ø in determining the basis on which costs would be assessed the defendant would ask the Court to take into account:
a) the letter dated 3 January 2017 which materially misstated the purpose and effect of the rule in Jones v Dunkel at a time the defendant was self-represented;
b) the unavailability, as a matter of law, of exemplary or aggravated damages as a remedy for breach of contract and in a claim for breach of confidence; and
c) the quantum of damages as claimed, which the letter noted ranged between $90,000 and $128,000 (the latter apparently notified in a Notice to Admit Facts document). However as we know from counsel’s opening, the damages claimed were $125,000.
Ø were the Court not to determine the case as suggested by the defendant, the plaintiff company had “not adduced any evidence of the quantum of the loss it claims was caused by the defendant’s actions. It has only tendered evidence of undivided bills applicable to a range of matters and in large part payable and paid by Mr Abrahams’ family trust on his own behalf. The cost of approximately $78,000 paid by your client, if somewhat generously divided equally between the two Supreme Court matters (against Milburn and Whygo) and without regard to the costs referable to the claimed undertaking, your clients recovered quantum would be less than half of the jurisdictional limit of the Magistrates Court of Victoria. This would result, pursuant to Rule 63A.25, in your client receiving no money whatsoever, and incurring the further costs of the remainder of the trial.”
90 The second Offer was expressed in the alternative as follows:
Our client therefore offers (to) settle all matters between the plaintiff and her on the following terms:
1. Payment by your client to our client of $85,000.00 in full and final settlement of all claims between the parties, including reserved costs and costs awarded howsoever, with the amount payable within 14 days;
2. The proceeding be dismissed; and
3. Settlement to be without prejudice to either party’s right against the other person or entity.
As an alternative to 1 above, our client will accept her costs as taxed, up to (but not inclusive of) 23 January 2017, such costs to be taxed at the County Court Scale.
91 The time for acceptance of the second Offer was “until 11 AM on Friday, (27) January 2017, unless withdrawn earlier”. The solicitors for the plaintiff company were exhorted to contact Mr Prawer directly as a matter of urgency to avoid the need for appearances by both counsel on Friday, 27 January 2017 and incurring unnecessary costs for any party as a result.
92 Lastly, the letter relevantly advised the plaintiff company that should the offer be refused and the proceeding determined on terms either equal or more favourable to the defendant, she reserved the right to present the letter on the question of costs pursuant to the principles enunciated in Calderbank and restated in Hazeldene’s Chicken Farm.
93 By letter dated 26 January 2017 the solicitors for the plaintiff company rejected the second Offer. This letter gave notice to the defendant that on 27 January 2017 the plaintiff company would seek leave to re-open its case and set out the basis of that application. The letter made a counteroffer for settlement, in the following terms:
Notwithstanding the above:
1. We reject your assertion that your client has no case to answer and we do not share your view that the Court will reach such a conclusion. However, if the Court does not allow our client to re-open its case and proceeds to determine that your client has no case to answer, we consider that it will be open to our client to appeal that decision; and
2. Our client offers to settle the Proceeding on the basis of your client paying to our client $88,000 plus costs (“the Offer”).
The Offer is open to be accepted by your client until 11 AM on Friday, 27 January 2017, unless withdrawn earlier.
In the event that your client does not accept the Offer and the Proceeding continues to trial and our client obtains an order more favourable than the Offer, and client will seek to rely upon the principles in Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333; Hazeldene’s Chicken Farm Pty Ltd v VWA (2005) 13 VR 435 and like authorities, to seek an order that your client pay our client’s costs from the date of this letter on an indemnity basis.
94 The clarity of the terms of the second Offer was not an issue. The defendant’s intention to seek a special order for costs should the offer be refused was clearly spelt out.
95 Ms Kelly submitted the refusal of the second Offer was, in all the circumstances of this case unreasonable. Mr Aghion, on the other hand, submitted that it was not unreasonable for the plaintiff company to pursue the application to re-open and, if successful, to ultimately test its case.
96 The second offer was made after the plaintiff’s case was closed and the defendant had notified and embarked on a submission of no case to answer but before the defendant had been put to her election.
97 The very quick response from the plaintiff company, accompanied by a counteroffer, suggests that the limited time allowed for consideration of the second Offer, no doubt influenced by the resumption of the hearing the following day, in all the circumstances, was adequate. Moreover, I was satisfied that, in view of the stage to which the proceeding had progressed, the plaintiff company, if so minded, was then in a good position to evaluate the strengths and weaknesses of its claim, not to mention the defence.
98 The alternative offers made within the second Offer did not involve payment of any sum of money on the claim, rather, as Mr Aghion submitted, they involved significant payments towards the defendant’s costs. In Mr Aghion’s submission neither of the alternative offers represented a genuine compromise. Counsel likened the second Offer to a threat and an attempt to establish an entitlement to a special order for costs.
99 I do not agree. Whilst the second Offer strongly conveyed the view that any attempts by the plaintiff company to resist the submission of no case to answer or to prosecute the claim to judgment were likely to fail, the question remained whether, in all the circumstances, it was unreasonable for the plaintiff company to continue to pursue the claim.
100 Accepting for the moment the accuracy of the defendant’s statement about her costs to the date of the second Offer, there was an element of compromise in respect to her costs in each offer. The element of compromise involved in the first part of the second Offer was as to a substantial portion of the defendant’s costs, whereas the alternative offer effectively excluded the costs of the final directions hearing on 23 January 2017 and the costs of the preparation of and running of the trial in the days that followed.
101 Evaluation of the extent of the compromise offered by the second Offer and whether one or other of the alternatives offered contained a real element of compromise, is best understood in the context of the plaintiff company’s prospects of successfully resisting the submission of no case to answer, alternatively its prospects of success if the claim were to proceed to judgment, having by then been given leave to re-open the plaintiff company’s case to tender the four documents mentioned in the plaintiff’s solicitor’s letter of the 26 January 2017.
102 At the time the second Offer was made the plaintiff company’s prospects of successfully resisting the submission of no case to answer were, objectively speaking, poor but had been improved by the decision to seek leave to re-open its case to tender the four documents. The documents were said to have been omitted in the running of the plaintiff company’s case due to oversight. Tender of these documents was intended to meet evidentiary deficiencies in the plaintiff company’s case, central to which was the absence of proof of causation, that is to say proof that the act of the defendant’s agent in giving confidential information to Whygo caused that company to commence the Whygo proceeding.
103 Had the plaintiff company been granted leave to re-open its case to tender the further documentation and the matter proceeded to judgment, I, nonetheless concluded that the prospects of successfully prosecuting the claim to completion were low.
104 Leave to re-open the plaintiff company’s case to tender the additional documentation would not have addressed the outstanding uncertainty about the quantum of the claim, the plaintiff company’s standing to sue to recover any or all of the legal costs incurred in defending the Whygo proceeding or the plaintiff company’s ownership of the confidential information (as defined in the Supreme Court proceeding). As to the latter, I make the observation that, had the plaintiff company been able to establish payment of some or all of the legal fees incurred in defending the Whygo proceeding, as at the date of hearing and as at the date the second Offer was under consideration, the plaintiff company could not have established ownership of the confidential information in its own right at the relevant time.
105 Furthermore, if it was not cognisant of this issue beforehand, on 24 January 2017 the plaintiff company was notified by senior counsel in opening that the defendant would argue that the claim for exemplary damages was not available as a matter of law.
106 As earlier noted, the matters summarised above bore upon both the likely success of the claim, the extent of the damages available and the extent of the costs the plaintiff company might reasonably expect to recover.
107 For the reasons stated, I concluded that, when viewed objectively, the rejection by the plaintiff company of the defendant’s Calderbank offer was unreasonable and the defendant is therefore entitled to an order for costs on an indemnity basis from 26 January 2017.
Indemnity costs from 6 February 2017
108 In view of the order for indemnity costs from 26 January 2017, it has not been necessary to also considered whether the final Calderbank offer made on 6 February 2017 was unreasonably rejected.
The opposed application for certification for two counsel
109 The plaintiff company did not cavil with the making of an order certifying fees for one junior or one senior/junior counsel. The question was whether certification for senior counsel and for two counsel was appropriate in the circumstances of this case.
110 The test in this regard is well-established – “[w]ould a prudent person not compelled by poverty come into Court in such a case without two counsel”.[36] The test postulates a reasonable person and what they would, not should, adjudge as necessary and prudent. Notably, in the past factors such as the complexity or difficulty of the issues of fact and law and the presentation required and the extent of preparatory research required have been considered relevant to considering whether at the time the brief was delivered it was prudent (or not as the case may be) to employ two counsel.
[36]Kroehn vKroehn (1912) 15 CLR 137
111 Ms Kelly submitted that in the circumstances of this case it was both prudent and reasonable to engage two counsel including senior counsel, to conduct the trial.
112 I note from the pleadings that the defendant’s Amended Defence filed in September 2014 was drawn by Mr Upjohn shortly before he took silk. Save for the filing of further and better particulars of the Amended Defence in May 2015, the claim and defence were as pleading in 2014. I concluded from this that Mr Upjohn was well acquainted with the pleadings, when four business days prior to the commencement of the hearing he was briefed to appear with Ms Kelly as his junior. At the time, the defendant had not been legally represented and no substantive work had been done in preparation of the matter for trial after Gadens Lawyers ceased to act for her during December 2016. Furthermore, the defendant had been unsuccessful in an application she made in person a week before the trial to adjourn the hearing.
113 Apart from the need to prepare the defendant’s case for trial at short notice, Ms Kelly pointed to the complexity of the issues raised by this case. For instance, there was the claim for exemplary damages for both breach of contract and breach of confidence, about which there would have been significant, substantial and complex legal argument. However, there were also the matters pleaded by way of defence. These included an allegation that the compromise agreement was void against public policy and multiple allegations of unlawful conduct arising under various statutes. Had the matter proceeded to hearing, the defendant carried the burden of proving these allegations, about which I was satisfied there would have also been significant, substantial and complex legal argument.
114 Finally, Ms Kelly observed that this proceeding was the third iteration of a business dispute that has been twice before the Supreme Court in separate proceedings. It was clear from both the pleadings and the matters upon which the case was opened, so the submission went, that it was intended by the plaintiff company to traverse the facts and circumstances of each of the earlier Supreme Court proceedings.
115 In response, Mr Aghion submitted that the cost of the decision to retain at short notice two counsel to prepare this matter for trial due to the urgent need to prepare the defence for trial should not be borne by the plaintiff company.
116 In all, I was satisfied that when the brief was delivered, this case exhibited a number of characteristics appropriate to the retainer of two counsel, including senior counsel. I propose to certify for two counsel.
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