AJH Lawyers Pty Ltd v Careri
[2013] VCC 1013
•21 August 2013
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
COMMERCIAL LIST
EXPEDITED DIVISION
Case No. CI-05-03742
| AJH LAWYERS PTY LTD (ACN 096 450 770) | Plaintiff |
| v | |
| PINA CARERI | First Defendant |
| and | |
| JACQUI MY HUI YANG | Second Defendant |
| and | |
| CARERI YANG & ASSOCIATES PTY LIMITED | Third Defendant |
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JUDGE: | HIS HONOUR JUDGE LACAVA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 – 4 October 2012 | |
DATE OF JUDGMENT: | 21 August 2013 | |
CASE MAY BE CITED AS: | AJH Lawyers Pty Ltd v Careri & Ors | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 1013 | |
REASONS FOR JUDGMENT
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Subject: Review of Taxation of Costs
Catchwords: Whether items of costs claimed were “necessary or proper” within rules 63A.29 and 63A.69. Whether Registrar fell into error in deciding items were necessary or proper by engaging in “hindsight” reasoning. Hindsight reasoning impermissible.
Legislation cited: County Court Rules of Procedure in Civil Proceedings 1999, r63A.57
Cases Cited:A J H Lawyers Pty Ltd v Careri & Ors [2011] VSCA 425; AJH Lawyers Pty Ltd v Careri [2007] VCC 832; Pennington v Russell (No 2) [1883] NSWLR 4; (1883) LR (NSW) Eq 41; London Scottish Benefit Society v Chorley, Crawford & Chester [1881-5] All ER Rep 1111; (1884) 13 QBD 872; Tolputt & Co Ltd v Mole [1911] 1 KB 836; Reed v Gray (1952] Ch 337; Wright v Trenchard (1895) 1 ALR 22b; 4 AD 1196; Ogier v Norton (1904) 29 VLR 536; 25 ALT 236; 10 ALR 76; 4 AD 119; Bartlett v Higgins [1901] 2 KB 230; Grant v Australian Knitting Mills [1937] SASR 113; W & A Gilbey Ltd v Continental Liqueurs Pty Ltd [1964] NSWR 527; Oldaker v Currington [1987] VR 712; Cachia v Hanes (1994) 179 CLR 403; Guss v Veenhuizen (No 2) (1976) 136 CLR 47; A & D Douglas Pty Ltd v Lawyers Private Mortgages Pty Ltd [2006] FCA 690; Mulley v Marney & Manifold (1959) 103 CLR 341.
Judgment: Decision of the Registrar on taxation erroneous in that he engaged in hindsight reasoning and failed to decide on an individual basis whether items of costs claimed were necessary or proper at the time costs were incurred. Decision of the Registrar set aside on review and amended bill of costs remitted to the Costs Court.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R van de Weil QC with Mr A Sandbach | AJH Lawyers |
| For the Defendants | Mr M Lapirow | Marsh & Maher |
HIS HONOUR:
1 This is an application by the plaintiff for a judge of the Court to review the decision of the Taxation of Costs Registrar (“the Registrar”). The application is made pursuant to rule 63A.57 of the County Court Rules of Procedure in Civil Proceedings 1999 (“the rules”). The plaintiff had asked the registrar to tax an amended bill of costs dated 29 August 2007. That amended bill of costs claimed total costs and disbursements of $558,771.00.
2 The Registrar conducted a taxation over several days in 2008. He heard submissions and received evidence. On 4 September 2008, the Registrar taxed off the amended bill of costs the amount of $488,120.57 and taxed and allowed the plaintiff’s costs in the sum of $70,929.43. The Registrar fixed the taxation fees in the sum of $5,790.65. I marked the amended bill of costs as taxed by the Registrar exhibit “A” before me.
3 As can be seen from the dates, the proceeding has a long history. It is necessary for the purposes of this application to deal with some of the history of the proceeding in the Court.
4 This is the second review. Another judge of this Court conducted a review of the Registrar’s decision in 2009 but that review was set aside by the Court of Appeal on 15 December 2011. The Court of Appeal remitted the review to this Court for determination by another judge.[1]
[1]AJH Lawyers Pty Ltd v Careri & Ors [2011] VSCA 425
5 It is convenient to borrow from that part of the judgment of the Court of Appeal which succinctly sets out the chronology, because it provides the background for the issues that I must decide.[2]
[2]AJH Lawyers Pty Ltd v Careri & Ors (ibid) paragraphs [7]-[16]
“Events leading up to the review
[7]The appellant AJH Lawyers Pty Ltd, is a firm of solicitors providing ‘legal and migration law services’.[3] The first and second respondents, Pina Careri and Jacqui My Hui Yang were employed by AJH Lawyers before leaving in September 2005.[4] The third respondent, Careri, Yang & Associates Pty Ltd, is a company that, AJH Lawyers alleges, was incorporated by Ms Careri and Ms Yang in July 2005.[5] In October 2005, AJH Lawyers commenced a proceeding against the respondents (collectively, ‘the Careri parties’). In essence, AJH Lawyers claimed that Ms Careri and Ms Yang used confidential information obtained through their employment with AJH Lawyers to set up a competing business and poach AJH Lawyers’ clients. The statement of claim pleaded a raft of various breaches and wrongs allegedly committed by the Careri parties, including breach of contract, breach of duty of confidentiality, inducing a breach of contract, and breach of employees’ duties under the Corporations Act 2001 (Cth).[6] AJH Lawyers sought damages (limited to the County Court’s then jurisdictional limit of $200,000), injunctions, and other relief.[7]
[3] Merits Decision, [2]
[4]Ibid
[5]Statement of Claim (24 October 2005), [9]
[6]Ibid [3]–[43]
[7]Ibid [21]–[22]
[8] AJH Lawyers acted as its own solicitors in the proceeding.
[9]The case management judge, his Honour Judge Anderson, ruled that the statement of claim was unsatisfactory and required amendment.[8] AJH Lawyers delivered a proposed amended statement of claim seeking damages of $768,318.13 and applied to transfer the proceeding to the Supreme Court.[9] But the proceeding settled before the question of leave to amend the statement of claim and the question of transfer to the Supreme Court were decided.[10]
[10]Prior to settlement, there had been a number of interlocutory hearings in the proceeding. Various discovery orders were made. Among them were orders that provided for AJH Lawyers’ computer experts to inspect copies of the Careri parties’ computer hard drives.[11]
[11]The proceeding settled on 4 January 2007 when AJH Lawyers accepted the Careri parties’ offer of compromise.[12] The terms of the settlement were that the entire proceeding (including Ms Careri’s counter-claim for $18,126.30 in allegedly unpaid employment entitlements[13]) was compromised in return for the Careri parties agreeing to pay AJH Lawyers $49,000, plus costs.[14]
[12]Following settlement, AJH Lawyers delivered a bill of costs for $704,701.88 and taxation of the bill commenced before the Registrar.
[13]The taxing Registrar referred a number of questions to his Honour Judge Anderson. Following a hearing, Judge Anderson delivered a written judgment answering these questions. In the judgment, his Honour found that ‘during 2006 [AJH Lawyers] pursued issues of discovery against the [Careri parties] in a way which appeared at times to be indiscriminate.’[15] He also found that ‘the litigation was directed by [AJH Lawyers] (as solicitors) and not by counsel. Counsel appeared at hearings and drafted Court documents, but it seemed clear that the primary judgment was exercised by the solicitors. It did not appear to be simply a case of the ‘vigorous’ or ‘robust’ conduct of the litigation, as [AJH Lawyers’] counsel Mr Best suggested. However, there is insufficient evidence that the litigation was conducted improperly, rather than, perhaps, inappropriately. There appeared to be an indiscriminate pursuit of every potential dispute rather than seeking a final resolution of the proceeding.’[16]
[14]As a consequence of the answers given by Judge Anderson, the original bill of costs was withdrawn by consent and an amended bill of costs was filed for $558,771.00.[17] Taxation of the amended bill then took place before the Registrar over eleven days or part days. Of the $558,771.00 claimed in the amended bill the Registrar allowed only $70,929.43.[18]
[15]For reasons that will become apparent, it is necessary to note that the Registrar was highly critical of the costs associated with the ‘computer inspection’, calling them ‘extortionate’.[19] These costs represented the bulk of the amended bill.[20]
[16]For example, AJH Lawyers claimed $30,372 (plus 40 per cent loading for ‘care, skill, attention and responsibility’) for ‘scanning’ Ms Careri’s ‘document list’ and another $114,855 (plus 40 per cent’) for ‘scanning’ Ms Yang’s ‘document list’. The total amount claimed, including loading, was thus $203,317.80. It appears that each ‘document list’ consisted of a table listing computer files found on the hard drives belonging to Ms Careri and Ms Yang. Each file was apparently represented by a row in the table. For each file, the table listed the file name, and various technical characteristics of the file, such as file size, the date when the file was created, ‘attributes’, and ‘MD5’.[21] The two document lists were 10,124 pages and 38,285 pages long respectively.[22] According to AJH Lawyers’ counsel, Mr Sandbach, the word ‘scanning’ in the bill of costs meant a quick examination.[23] The document lists were apparently ‘scanned’ on the screen, without printing them.[24] AJH Lawyers ‘scanned’ the 48,409 pages of the two document lists over the course of a single day, charging $3 per page, plus 40 per cent loading.[25]”
[8]AJH Lawyers Pty Ltd v Careri [2007] VCC 832, [6] (‘Judge Anderson’s Decision’); Merits Decision, [4]
[9]Judge Anderson’s Decision (ibid) [7]–[8]
[10]Ibid [8]
[11]Order of Judge Anderson (5 July 2006); Order of Judge Anderson (7 July 2006); Order of Judge Anderson (No 2) (7 July 2006); Order of Judge Anderson (18 July 2006)
[12]Judge Anderson’s Decision (ibid) [8]
[13]Ibid [3]
[14]Offer of Compromise (21 December 2006)
[15]Judge Anderson’s Decision (ibid) [27]
[16]Ibid [28]
[17]Merits Decision, [14]
[18]Taxation of Costs — Order (4 September 2008)
[19]Determination in Relation to Item No 583, Instructions for Brief (2 July 2008)
[20]Merits Decision, [40], [98], [134]
[21]At the review, AJH Lawyers’ counsel could not explain what most of these characteristics meant: Merits Decision, [105].
[22]Merits Decision, [98], [104]; Amended Bill of Costs (29 August 2007), 64.
[23]Merits Decision, [102].
[24]Ibid [107]
[25]Amended Bill of Costs (29 August 2007), 64
6 The amended bill of costs taxed by the Registrar, exhibit A, is some 69 pages in length and provides for some 607 separate items of costs.
7 Rule 63A.57 of the rules at the relevant time provided, inter alia, for a party objecting to the order of the Registrar by notice to state “specifically and concisely the grounds of objection” to the order and “the order sought in its place”.[26] The rule also provided that on review, further evidence shall not be received, and a party objecting “shall not raise any ground of objection not stated in the notice.[27]
[26]Rule 63A.57(4)
[27]Rule 63.57(8)
8 The rules provide that on the review, the Court may:
“(a)exercise all the powers and discretions of the Registrar with respect to the subject matter of the review;
(b) set aside or vary the order of the Registrar;
(c) remit any item in the bill to the Registrar;
(d) make such other order as the case requires.[28]
[28]Rule 63A.57(9)
9 The review of costs before me proceeded on an Amended Notice of Application to Review Order of the Taxing Registrar dated 21 November 2008. That document provides for a schedule of the individual items of costs objected to by the plaintiff in the Registrar’s decision. The schedule divides the items into eight (8) categories and lists the individual items objected to by number. It also sets out the grounds for objection in a global sense for each category. The eight categories of items are listed in the schedule as follows:
“A Discovery/Inspection;
B Discovery/Inspection;
C Instructions for Brief;
D Instructions for brief;
EItems not relating to applications to the court of which there were no orders made by the court as to costs;
F Interrogatories;
G Referral under Part 3 of the Courts (case Transfer) Act 1991;
H Costs of Taxation.”
10 Before me, items in categories E, F and G were conceded by the plaintiff and no review of the Registrar’s decision was pressed in respect of those items in the amended bill of costs dealt with under those headings.
11 In respect of the items listed in categories A to D and H, where the Registrar taxed off the whole or part of the item claimed in the amended bill, the plaintiff seeks the following orders from me:
(i) The items be allowed in full; or
(ii) Alternatively, the items be allowed insofar as the entitlement is concerned and the matter be remitted to the Deputy Registrar to determine the quantum that ought to be allowed; or
(iii) Alternatively, the matter be referred back to the Deputy Registrar for further taxation.
12 The review proceeded before me on the basis that the plaintiff, as the party objecting to the order of the Registrar, has complied with the requirements of rule 63A.57(4).
13 The Registrar made two determinations which are critical to the issues I have to decide on this review.
14 On 2 July 2008, the Registrar published reasons in writing entitled “Determination in Relation to Item No 583, Instructions for Brief”. By this determination, the Registrar gave his reasons for disallowing most of the costs claimed by the plaintiff in the amended bill of costs under item 583 for “Instructions for Brief”. After a request by the parties, the Registrar published a further determination that related to his reasons for rejecting other items in the amended bill. That determination is dated 5 December 2008. It was published after the review process had been invoked by the plaintiff. I will deal with this further determination later. The central issue to be decided on review relates to the Registrar’s determination concerning item 583 not to allow the plaintiff the costs claimed that related to the computer inspection. The plaintiff argues the Registrar wrongly disallowed this item and in consequence it has been denied costs to which it is entitled because the items disallowed on the evidence were necessary or proper costs. The defence says they were not.
15 It is important, I think, to have regard to what the Registrar said in his determination dated 2 July 2008, because it is critical to the way the plaintiff argues that the Registrar fell into error. The Registrar’s determination of 2 July 2008 provided, inter alia, as follows:
“While both the parties’ submissions in relation to this item are detailed and lengthy I found the plaintiff’s submissions to be particularly prolix, tedious and unnecessary in parts. However, by carefully perusing all of the submissions and taking extensive notes I have expanded my knowledge of the proceeding, its background and how it was conducted and confidently make this carefully considered determination.
My responsibility in this matter is to allow the costs claimed that are necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed. ….
The plaintiff is responsible for proving that the costs claimed are necessary or proper for the attainment of justice or for enforcing or defending its rights.
The vast majority of the costs claimed for this item are the costs of and associated with the recovery, copying and inspection by IT forensic experts of the defendants’ computer hard drives, the plaintiff’s hard drives used by the defendants while they were employed by the plaintiff and the plaintiff’s back-up tapes. Despite the plaintiff’s objection to the term ‘computer inspection’ for this process I intend to use it for ease of reference in this determination.
It is not disputed that the Court permitted the plaintiff to carry out the computer inspection and the defendants consented to some interlocutory orders relating to it. However the fact that the Court ordered it or the defendants consented to it does not necessarily justify the way in which it was carried out and the expenses associated with it. I must determine whether it was necessary or proper for the plaintiff to have undertaken the discovery process in the way that it did and whether the defendants should be responsible for any or all of the costs associated with it.
ANALYSIS OF THE PROCEEDING:
Firstly I will deal with whether or not I should be guided by the comments made by his Honour Judge Anderson as to the taxation of these costs.
The Court record indicates that this proceeding first came before Judge Anderson on 7 March 2006 when his Honour ordered, inter alia, that it be cased managed by him and that, if possible, the trial and any interlocutory applications be listed before him. Thereafter the matter was before his Honour on at least nine further occasions.
His Honour Judge Anderson is a very experienced and knowledgeable judge who specialises in the management and adjudication of complex commercial matters. His Honour’s reasons for judgment confirm to me that he possesses a thorough and detailed knowledge and understanding of this proceeding and its background. Although I have taxed the costs in it over several days I do not believe that I have anywhere near the detailed knowledge of the proceeding and its background that Judge Anderson has. While I agree that it is up to the plaintiff to determine how its case should be framed and it is not for the Court to impose a manner or form of pleading which the Court considers to be better, I believe that Judge Anderson has more unbiased knowledge and is in a better position than anyone to look at this proceeding objectively and to express his considered views in relation to it.
The plaintiff has submitted that:
‘… it can be argued that, in the event the Registrar is reliant conclusively on these remarks in exercising his discretion, that he would not be properly exercising his discretion in the determination of a bill of costs, in light of the fact that the Registrar’s discretion as to costs in a taxation is very wide and ought not to be fettered.’
I believe that his Honour’s comments are more than just mere remarks. Rather I believe they are considered comments and opinions based on his thorough knowledge of how the discovery process was undertaken and how the case was conducted generally that he felt compelled to make. Whilst I believe that Judge Anderson’s comments are relevant and helpful, I also believe that my discretion has not been fettered or compromised by them and I point out that I do not rely on them conclusively in the exercise of my discretion. I believe that I can and should take them into consideration. In his reasons at [32] his Honour considered that:
‘… in the circumstances it is incumbent on the Court to adopt a conservative approach to the taxation of the plaintiff’s costs, particularly as there appears to be a lack of proportionality between the amount recovered by the plaintiff in the proceeding and the amount of the costs claimed’.”
16 The Registrar then went on to examine the evidence before him that concerned what he called “the computer inspection”. He concluded that by the time the proceeding was compromised, “the computer inspection had identified few documents that would or could potentially support the plaintiff’s claim”.
17 The Registrar, in his determination, was also critical of the purpose of some of the work undertaken by the IT experts retained. He said, inter alia:
“It is not clear whether the majority of the work undertaken by Volante had any relation to the discovery of documents to establish dishonest conduct by the defendants or whether it is even proper to claim some of their work in this cost item, particularly any work that related to applications in the proceeding for which the costs have been disallowed. It is also questionable whether any or all of the work performed by the experts from Info-Red and IS Solutions had any relevance in relation to or in support of the plaintiff’s claims. My view is supported by Judge Anderson who states in his reasons for judgment at [25]:
‘The proceeding was resolved at a time when the plaintiff had not, in my judgment, articulated a claim which was capable of being tried without significant re-pleading and particularisation.’
And further at [29] his Honour states:
‘From my examination of the proposed amended statement of claim and the submissions made by the parties on this issue, I am not able to conclude to what extent the material, derived from an examination of the defendant’s computer hard drives, was used in the preparation of that document. Although the proposed amended pleading is extensive, the pleading resorts to generalised claims and non-specific quantification of claims, and in many places it refers to an inability on the plaintiff’s part to provide particulars at that time.”
18 The Registrar then set out a number of conclusions. He said this:
“Based on my knowledge of the proceeding, my exhaustive perusals of the parties’ submissions and Judge Anderson’s reasons for judgment, I have reached the following conclusions:
· I agree with Judge Anderson’s view at [20] that ‘the plaintiff expanded a claim which, as its basis, had a simple and apparently justified complaint, into a very complex case of unknown validity’.
· The plaintiff had failed to adequately articulate its claim by the time the proceeding settled and it was questionable whether the computer inspection significantly contributed to the proposed amended statement of claim. This view is shared by Judge Anderson at [29] quoted above and also at [31] where His Honour states: ‘… It would be an extremely time consuming and costly exercise to make a final determination of the question of whether the discovery of the defendants’ hard disc drives significantly contributed to the preparation of the proposed Amended Statement of Claim and whether the amended claims had merit. In the circumstances, it has not been appropriate to undertake that task.’
· As noted by the defendants in their submission, the proposed amended statement of claim did not contain any reference to any element of the claim that depends on the computer inspection. In its submission, the plaintiff concedes that ‘it had not had the opportunity to review the documents located by counsel and the expert from the defendants’ hard drives’ and throughout the proposed amended statement of claim, when providing particulars of the various claims, the plaintiff continually states that: “… further particulars shall be provided after completion of proper discovery by, and interrogation of the first and second defendants.’ I wonder at the enormity of the total claim for costs for ‘the completion of proper discovery and interrogation’ if the proceeding had not settled when it did.
· It is significant that Judge Anderson did not allow the plaintiff the previously reserved costs of the interlocutory applications in relation to the computer inspection or the costs of the preparation and delivery of the proposed amended statement of claim.
· I agree with the defendants’ submission that the basic elements of the plaintiff’s claim were provable by other sources and I believe that the plaintiff could have attempted to establish the defendants’ unconscionable and dishonest conduct in a more conventional, much less expensive way. I believe that it would have been possible for the plaintiff to distinguish between people who had previously been its client and those who had not from the defendants’ discovered documents. The plaintiff actually states that the defendants’ discovered documents revealed documents that would damage the defendants’ case and advance the plaintiffs.
· I find it impossible to justify the extortionate costs of discovery by way of the computer inspection particularly since the proceeding settled before the plaintiff had properly articulated its claim and the costs claimed are disproportionate to the amount the plaintiff recovered at settlement.
· I question whether a reasonably prudent man would have attempted to establish his claim in the way that the plaintiff’s principal did if he was not representing himself. I agree with the defendants’ contention that the plaintiff’s conduct of the proceeding lacked moderation and balance and I believe that, if the plaintiff was not its own client, it would have been appropriate for a ‘Blythes’ case warning to be given.
· ‘The Law of Costs’ by L L Oliver at page 66 under the heading ‘Solicitor in Person’ states: ‘A solicitor conducting his own case is entitled to the same costs as if he had employed another solicitor, except as to such charges as are rendered unnecessary by his acting in person.[29] He cannot, for instance, charge for such items as attending upon himself or instructing himself,[30] nor for such work as would ordinarily be done by a party for whom he is acting.[31]’
For these reasons I am not satisfied that the plaintiff has established that it was necessary or proper for the conduct of its claim to conduct the computer inspection and I do not believe that the defendants should be responsible for the majority of the extortionate costs of and associated with it.”
[29]Pennington v Russell (No 2) [1883] NSWLR 4; (1883) LR (NSW) Eq 41; London Scottish Benefit Society v Chorley, Crawford & Chester [1881-5] All ER Rep 1111; (1884) 13 QBD 872; Tolputt & Co Ltd v Mole [1911] 1 KB 836; Reed v Gray [1952] Ch 337
[30]Wright v Trenchard (1895) 1ALR 22b; 4 AD 1196
[31]Ogier v Norton (1904) 29 VLR 536; 25 ALT 236; 10 ALR 76; 4 AD 1197
19 The Registrar then set out his determination. He concluded that the plaintiff had failed to demonstrate that the costs of the computer inspection was necessary or proper. He said this:
“DETERMINATION:
The plaintiff has failed to demonstrate that the computer inspection was necessary or proper for the conduct of the proceeding or for the attainment of justice or for enforcing or defending its rights and I disallow the costs of and associated with the computer inspection with one exception. I believe that it is proper to allow the plaintiff an amount for scanning or perusing the actual documents discovered in the computer inspection that would or could have advanced its case. I will hear the parties’ representatives on this although I do not propose to ascertain those documents by conducting an examination seriatim.
I believe it is proper to allow the plaintiff an amount for perusal of the defendants’ discoverable documents and cross referencing them with its client list. Again, I do not propose to go through them seriatim but I will hear the parties’ representatives on this.
I do not believe that the plaintiff’s perusal of its own business records are party/party costs and I disallow that. I also disallow any claims for the solicitor attending on himself or instructing himself.
I will hear the parties as to the JY folders.
If the plaintiff is able to identify and establish that any other claims in this item apart from costs of and associated with the computer inspection are necessary or proper party/party costs I will consider them, subject to argument.”
20 The reasoning of the Registrar in summary appears to have been that the computer inspection did not result in the plaintiff obtaining a great deal of evidence to assist its case and this was reflected in the form of the Proposed Amended Statement of Claim. He also considered that the basic case brought by the plaintiff could have been proved in other ways by, for example comparing clients’ lists. He concluded that the plaintiff had tried to expand the claim beyond that which it could prove as reflected in the Proposed Amended Statement of Claim. He relied upon the fact that Judge Anderson refused the plaintiff the costs of the interlocutory applications to carry out the computer inspections and refused to approve of the form of the Proposed Further Amended Statement of Claim.
21 The plaintiff’s complaint on review in summary is that the Registrar’s decision in disallowing the costs of the computer inspection was erroneous because he applied hindsight reasoning. Instead of examining the evidence before him in order to come to a proper decision as to whether or not the costs of each item claimed was necessary or proper, the Registrar applied hindsight reasoning and disallowed each item. The plaintiff’s further complaint is that having engaged in hindsight reasoning, the Registrar fell into error by disallowing items of costs claimed that related to the plaintiff’s costs incurred in complying with interlocutory orders made by the Court that related to discovery. The plaintiff points out that these orders were either consented to, or were sought by the defendants themselves.[32] In summary, the plaintiff argues that costs incurred as a result of complying with court orders for discovery cannot be said to be either unnecessary or not properly incurred because there was a cost involved in complying with the orders.
[32]The plaintiff specifically refers to the Orders made on 31 January 2006, 28 April 2006, 19 May 2006, 5 July 2006, 7 July 2006, 18 July 2006, 5 September 2006, 12 September 2006 and 29 September 2006.
22 I have concluded that there is merit in the plaintiff’s arguments. In my view, the Registrar did erroneously engage in hindsight reasoning and he did fall into error in disallowing in full the costs to the plaintiff of complying with the interlocutory orders made by the Court.
23 Judge Anderson’s decision[33] was heard after argument conducted before him by the parties on 21 June 2007. The matter came back before his Honour as part of the taxation process when the Registrar referred questions to him within rule 63A.51. In the course of answering the questions referred to him, Judge Anderson said, inter alia, as follows:
[33]ibid
“13The factors which persuade me that the case was appropriately brought in the County Court are as follows:
…
(2)… The essential complaint in the proceeding concerned the first and second defendants’ misuse of their employer’s confidential information to establish a business in competition with the plaintiff. There was clear evidence that the defendants had downloaded material from the plaintiff's computer system and had taken steps to hide their actions. The proceeding was a timely and, it appears, soundly-based claim.
(3) These types of claims are notoriously complex. The precise nature and extent of the misuse of confidential information is always difficult to ascertain, and how such conduct translates into a monetary claim or other appropriate relief is never easy to quantify or articulate. It could not be said that the commencement of the proceeding in the County Court was inappropriate. … .”
24 When dealing with the question of which party should pay reserved costs, Judge Anderson said, inter alia:
“26… The proceeding was resolved at a time when the plaintiff had not, in my judgment, articulated a claim which was capable of being tried without significant re-pleading and particularisation.
27Further, during 2006 the plaintiff pursued issues of discovery against the defendants in a way which appeared at times to be indiscriminate. The plaintiff asserted that it was legitimately trying to find material to support its claims. On the other hand, the defendants submitted that the plaintiff's objective was to use its capacity as a party acting as its own solicitor to pursue expensive interlocutory processes to test the resolve of the opposing litigants, particularly in this case, where they were business competitors.
28In relation to this matter, I am reluctant to ascribe improper motives to the plaintiff. … However, there is insufficient evidence that the litigation was conducted improperly, rather than, perhaps, inappropriately. There appeared to be an indiscriminate pursuit of every potential dispute rather than seeking a final resolution of the proceeding.
…
32 If the proceeding had concluded with a trial and judgment of the Court, matters of costs, and particularly reserved costs, could have been determined far more easily. That has not happened and I consider in the circumstances it is incumbent on the Court to adopt a conservative approach to the taxation of the plaintiff’s costs, particularly as there appears to be a lack of proportionality between the amount recovered by the plaintiff in the proceeding and the amount of the costs claimed.
33 Question (3) should be answered as follows: The costs of the interlocutory hearings which were reserved should be borne by the parties who incurred the costs and, specifically, the plaintiff's costs should not be paid by the defendants.”
25 Judge Anderson then went on to set out a number of observations under the heading “General Matters”. What he there set out was not necessary for the purposes of answering the questions that the Registrar had referred to him. To the extent that the Registrar had regard to these observations, I am of the view that he fell into error. That is because it fell to the Registrar to decide on the evidence before him whether an item claimed was necessary or proper. He failed to do that. In any event, to the extent that the Registrar did have regard to the observations of Judge Anderson, I am of the view he misunderstood what it was that Judge Anderson said.
26 Judge Anderson, in his general remarks, referred to some of the orders made on interlocutory applications. His Honour then went on to say, inter alia:
“40It is appropriate, in my view, that the taxation of these items be approached conservatively, as they constitute a very large proportion of the plaintiff's Bill of Costs. I have already noted that it would not be appropriate to conclude, upon the material presently available, that the plaintiff's approach to the defendants’ discovery of the hard disc drives was an opportunistic, oppressive interlocutory procedure adopted for ulterior motives, rather than a process that was necessary to enable the plaintiff to properly articulate its claim or to advance its claim to trial. On the other hand, the inclusion of such a large and disproportionate item of costs under the general item ‘instructions for brief’ would seem to have little justification.”
27 It can be seen from what Judge Anderson said that he was of the view that the costs of the computer inspection were at least necessary “to enable the plaintiff to properly articulate its claim or to advance its claim to trial”. Judge Anderson’s concern was as to the amount claimed. In my judgment, despite what the Registrar has said, he impermissibly allowed himself to be influenced by what Judge Anderson said under the heading of “General Matters”. What Judge Anderson said at that part of his judgment was not necessary to answer the questions referred to him by the Registrar.
28 It was the Registrar and no one else that had the task of deciding whether the items claimed were necessary or proper. In my view, the Registrar placed too much weight on what Judge Anderson said, and that appears to have led him into hindsight reasoning instead of deciding whether each item claimed was necessary or proper at the time the cost was incurred. An irrelevant comment by Judge Anderson to tax the plaintiff’s costs “conservatively” does not relieve the Registrar of the task of deciding, according to legal principle, whether the item claimed as costs was necessary or proper at the time the cost was incurred.
29 In consequence of the ruling of Judge Anderson that the reserved costs be born by the party incurring those costs, the plaintiff amended the original bill of costs submitted for taxation. That was the main reason for reduction of the bill from $700+K to $550+K. The plaintiff’s costs incurred on the interlocutory applications themselves were taken out of the amended bill. That was appropriate. But the costs incurred in complying with or resulting from the orders made were costs of the proceeding generally. In my judgment, the plaintiff is entitled to claim these costs on taxation. These costs ought not be lost to the plaintiff because Judge Anderson ruled that reserved costs be paid by the party that incurred the costs. I accept the plaintiff’s argument that the costs incurred in complying with the interlocutory orders are not reserved costs or, part of the reserved costs, they are costs in the proceeding and, having regard to the terms of the compromise between the parties, properly payable by the defendants.
30 Judge Anderson ordered that the appropriate scale of costs for the Registrar to apply to the taxation was scale “C”. Appendix A of the Scale of Costs to the County Court Rules of Procedure in Civil Proceedings 1999, provided that “The Judge, Registrar or other taxing officer shall have full discretion to allow any fee, cost or disbursement in full, or in part”. That was the source of the discretionary power to the Registrar.
31 Rule 63A.29 of the rules is in Part 3 of the rules that deals with “Costs of a Party in a Proceeding”. As rule 63A.27 explains, “this part applies … to costs in a proceeding which by or under any Act or Rules … are to be paid to a party … by another party”.
32 The defendants were required to pay the plaintiff’s costs by operation of the compromise rules and indeed by the terms of the offer itself. The terms of the offer of compromise made by the defendants and accepted by the plaintiff required the defendants to pay the plaintiff’s costs of the proceeding.
33 Rule 63A.29 provided:
“63A.29. Party and party basis
On a taxation on a party and party basis all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed shall be allowed.”
34 Because the plaintiff’s costs were being taxed in the Court, rule 63A.69 also applied. It provided as follows:
“63A.69. Necessary or proper costs
All costs shall be allowed as are necessary or proper for the attainment of justice or for enforcing or defending the rights of any party.”
35 It can be seen that the rules embraced the need for the plaintiff to demonstrate that any costs claimed were necessary or proper. At no time did the Registrar invoke the power he had in rule 63A.70(1) to disallow the costs of any unnecessary work or work which he considered to be done without due care.
36 The Registrar had a great deal of evidence before him on the taxation, and that evidence is also relevant in this review.
37 The plaintiff filed a number of affidavits. Gene Volovich swore three affidavits. The first was dated 4 July 2006. Mr Volovich was the solicitor at the plaintiff firm who had the carriage of the proceeding in the Court. The affidavit was filed in the Court in support of an application for summary judgment because of asserted failures by the defendants to comply with orders for discovery and it attached exhibits. In paragraph 14, Mr Volovich deposed, inter alia:
“14One of the categories of documents that the Defendants are attempting to obtain by way of supplementary discovery is the Plaintiff’s clients’ files to which this proceeding relates. I verily believe that the Defendants are attempting to do so for an ulterior or improper purpose, namely to obtain access to those client files in order to facilitate the third Defendant to provide services to those clients in furtherance of the Defendants’ continuing unlawful and dishonest conduct. My belief is based on the following facts:
(a)The Plaintiff’s claim relates to a large extent to breaches by the first and second Defendants of their obligations during the course of their engagement by the Plaintiff. In particular the Plaintiff alleges that the Defendants unlawfully and dishonestly obtained and used client information belonging to the Plaintiff to solicit the Plaintiff’s clients for their own benefit.
(b)Following the resignation of the first and second Defendants from the employ of the Plaintiff, and the establishment of the third Defendant as a competitor of the Plaintiff, the Defendants procured authorities from a large number of the Plaintiff’s clients, which purported to direct the Plaintiff to transfer those clients’ files to the third Defendant. In many cases the Plaintiff refused to comply with the purported client authorities as it was under no obligation to do so pursuant to the terms of its contracts of engagement with each of those clients.”
38 The affidavit went on to exhibit documents said to evidence the defendants’ intentions. One email which is part of exhibit “GV-3” is an email from the second defendant to the first defendant dated 14 September 2005 which, on the face of it, seems to convey specific instructions as to how to destroy electronic evidence contained in the second defendant’s computer located at the plaintiff’s practice. When this email came to is attention the plaintiff was entitled to assume that the defendants had been acting against its interests from within and whilst in its employ.
39 The second affidavit of Mr Volovich which was also relied upon on taxation by the plaintiff was sworn 3 April 2008. That affidavit deposed to the history of the proceeding and the orders made by Judge Anderson on the issue of the discovery of the defendants’ hard drives from their computers. The affidavit also set out a history of the involvement of expert witnesses to analyse the hard drives and computers of the defendants. The affidavit was clearly intended to provide the evidence for the items claimed in the amended bill of costs under item 583, being “instructions for brief”.
40 The third affidavit of Mr Volovich was dated 2 November 2007. That affidavit provided the evidence to support the claims made in items 583(i), (ii) and (iii).
41 In dealing with this review I have had full regard to the affidavit evidence of Mr Volovich. The reasoning of the Registrar appears to have had little or insufficient regard to this evidence which, in my view, goes to establishing that the items of costs claimed in item 583 were necessary or proper. In my view, to the extent that the Registrar ignored or gave little weight to this evidence, he was in error.
42 On the review, the plaintiff also relied upon the affidavits of Catherine Dealehr, sworn 10 November 2008, and Nurcan Durali, sworn 12 November 2008, to explain in part what had occurred before the Registrar on taxation. I have also had regard to these affidavits. Again, the reasoning of the Registrar appears to have had little or insufficient regard to this evidence which, in my view, goes to establishing that the items of costs claimed in item 583 were necessary or proper. In my view, to the extent that the Registrar ignored or gave little weight to this evidence, he was in error.
43 The plaintiff also filed and relied upon an affidavit of James Cook, sworn 10 July 2008. Mr Cook is an Australian Legal Practitioner with an expertise in computers who was engaged by the plaintiff during the course of discovery to scan the hard disc drives discovered by the defendants for the purposes of locating documents that could assist the plaintiff’s case. These costs should have been regarded by the Registrar as both necessary and proper. In my judgment, the plaintiff has made out its case that the items of costs claimed in the amended bill of costs that related to the computer inspection and which were disallowed by the Registrar were in fact necessary or proper costs of the proceeding. The discovery process in this proceeding was long and complex. Because the parties were all legal practitioners, the discovery process had to allow for privilege and confidentiality issues. The discovery process resulted in tens of thousands of documents being discovered in electronic format. Because of the issues raised in the proceeding, the plaintiff was justified in inspecting these documents, at least by scanning them, in order to decide whether any of the documents advanced or harmed its case. In the end only a few of the defendants’ discovered documents assisted the plaintiff’s case, but having regard to the way the defendants had conducted themselves by evincing an intention to destroy evidence, the plaintiff was entitled to at least scan all of the documents discovered. From what I can see, the plaintiff was obstructed at every step in the proceeding and was justified in pursuing discovery and inspection of the discovered documents in the way that it did.
44 Before the Registrar, and on review, the defendants also relied upon a great deal of material. I set it out because, in part, it demonstrates why the costing of the plaintiff’s costs has, in my judgment, been made so complex, complicated, lengthy and difficult. On 7 March 2012, Judge Kennedy directed the parties to file on the re-hearing of the review, a short list of documents on which each party wished to rely. Each party did that and also copied the documents into folders. The plaintiff’s were relatively short; the defendants’ lengthy.
45 The defendants relied upon the original bill of costs that the plaintiff sought to have taxed before Judge Anderson ruled on the questions he was asked. Even though the review concerned the amended bill of costs, the defendants insisted on copying the original bill. It is 95 pages in length and irrelevant to the review.
46 The defendants also relied upon the 14-page judgment of Judge Anderson of 27 July 2007.
47 Even though the plaintiff had filed a copy of the amended bill of costs in the Court, the defendants made another copy and placed that in their folder. That was a further 69 pages needlessly copied.
48 The defendants relied upon a notice of objections to the plaintiff’s amended bill of costs. The objections are dated 18 September 2007. Interestingly, in the notice of objections in relation to item 583, which is instructions for brief, the defendants said in their notice:
“583Excessive claim for instructions. Further fees claimed by consultants are extravagant. Defendants require production, prior to the taxation or the consideration of these items, of the experts’ letters of instruction, quotations obtained, bills rendered, and reports produced so that they can obtain proper instructions as to the reasonableness of the charges made.
583 Not necessary, solicitor and client item at best.”
49 As at 18 September 2007, the defendants did not appear to be arguing item 583 was not properly payable. The concern seemed to focus on the amount of the charges.
50 The defendants also relied upon the first two affidavits filed by the plaintiff of Mr Volovich and an affidavit of Jason Mills dated 4 February 2008. Mr Mills is the Information Technology manager at Wisewoulds solicitors, who act for the defendants on the taxation and review. Mr Mills gave evidence about the type of and the amount of electronic data discovered in the proceeding. I have taken this affidavit fully into account.
51 On 15 February 2008, the Registrar ordered the parties to file written submissions on the issue of item 583, Instructions for brief. The defendants filed a 26-page closely spaced submission with an attachment. The submission is signed by counsel and dated 8 March 2008. That has also been provided to me and the defendants rely upon those written submissions. I have taken the submission into account on this review.
52 The plaintiff filed a 95-page response dated 2 April 2008 which the defendants also copied. Those submissions were supported by two lever arch folders of attachments divided into 20 numbered tabs. I estimate there to be approximately 800 pages of documents relied upon in these attachments. I have also taken the plaintiff’s submission and the attachments into account on this review.
53 The defendants then filed a written response to the plaintiff’s submission dated 24 April 2008. That consisted of a further 16 pages of closely spaced submissions.
54 However, that was not the end of the matter. The plaintiff filed further written submissions which it said were filed “as a result of the incorrect assertions contained in the submissions of the defendants in response dated 24 April 2008”.
55 It was on the basis of all of this material that the Registrar made his written determination in relation to item 583, “Instructions for Brief”. In considering this matter, I have taken all of these submissions and the affidavit evidence into account.
56 As can be seen, the material filed and relied upon by the parties both before the Registrar and on review is substantial and in part accounts for the delay between the time that I heard this review and the time taken to deliver judgment. It has taken many hours to read and absorb all of this material.
57 In its Amended Notice of Review, the plaintiff sets out its objection to the decision of the Registrar. As I indicated earlier, there are several parts of the Notice but the argument relating to each part is similar. It is necessary to set out the relevant parts of the Amended Notice of Review:
“A: Discovery/inspection
Item Numbers:
280, 281, 287-290, 303-306, 311-318, 359-361, 379, 380, 385, 386, 393, 394, 397-400, 405, 406, 411, 412, 414, 419-421, 433-437, 450, 467-474, 482, 483, 492-494, 516, 517, 533, 536, 537, 538, 557, 558, 592, 594 and 596(a)
Grounds of Objection:
1The deputy registrar erred in disallowing the plaintiff’s entitlement to the costs of the proceedings, being:
iDisbursements comprised of IT expert’s costs incurred by the plaintiff relating to the inspection and copying of the defendants’ computer documents by IT experts, carried out and incurred pursuant to court orders made on 5, 7 and 18 July 2006 and 5, 12 and 29 September 2006;
iiThe plaintiff’s professional costs incurred in compliance with court orders made on 28 April 2006, 19 May 2006, 1 June 2006, 5, 7, 18 July 2006, 5, 12 and 29 September 2006.
On the grounds that, the Deputy Registrar:
a made an error of law and applied a wrong principle in disallowing the plaintiff’s entitlement to the costs of the proceeding pursuant to the plaintiff’s acceptance of the defendants offer of compromise (refer to Rule 26.03 (7));
b made an error of law and applied a wrong principle in disallowing the plaintiff’s entitlement to the costs of the proceeding that were carried out and incurred pursuant to the court orders made on 5, 7 and 18 July 2006 and 5, 12 and 29 September 2006;
c made an error of law and applied a wrong principle in failing to determine whether these items were necessary or proper within the meaning of the County Court Rules of Civil Procedure in Civil Proceedings 1999 (‘the Rules’), in that he failed to determine the merits of each item and whether each item was, first, necessary or secondly, whether the item was proper, taking into account the legal principle that what constitutes ‘proper’ at law includes items that may be considered unnecessary with the benefit of hindsight but were properly incurred at the point in time that the costs were incurred, and not whether such items were necessary or proper determined retrospectively, or with the benefit of hindsight.
d erred in the exercise of his discretion in that he:
iWas guided by wrong principles – see the Determination and the plaintiff refers to and repeats pages 1-3, 7 of the Plaintiff’s Submissions dated 21 May 2008 (‘the May Submissions’)
iiMade a mistake as to the facts – see the Determination (the plaintiff refers to and repeats pages 13-48 of the Plaintiff’s Submissions in Response to the Defendants’ Submissions dated 2 April 2008 (‘the Submissions’), in particular pages 16-48)
iiiFailed to consider the relevant evidence or matters before him in respect of whether these items were necessary or proper – (the plaintiff refers to and repeats pages 16-48 of the Submissions, the Affidavits of Mr Gene Volovich sworn 3 April 2008 and 2 November 2007, the Affidavit of Mr James Cook sworn 10 July 2008).
2The deputy registrar erred in applying his erroneous determination of 2 July 2008 concerning the ‘instructions for brief’ items (‘the Determination’) to items that related to disbursements concerning IT experts’ costs and professional costs which did not form part of the ‘instructions for brief’ items, on the grounds that, the Deputy Registrar:
amade an error of law and applied a wrong principle in failing to determine whether these items were necessary or proper within the meaning of the County Court Rules of Civil Procedure in Civil Proceedings 1999 (‘the Rules’), in that he failed to determine the merits of each item and whether each item was, first, necessary or secondly, whether the item was proper, taking into account the legal principle that what constitutes ‘proper’ at law includes items that may be considered unnecessary with the benefit of hindsight but were properly incurred at the point in time that the costs were incurred, and not whether such items were necessary or proper determined retrospectively, or with the benefit of hindsight.
berred in the exercise of his discretion in that he:
iWas guided by wrong principles – see the Determination and the plaintiff refers to and repeats pages 1-3, 7 of the Plaintiff’s Submissions dated 21 May 2008 (‘the May Submissions’)
iiMade a mistake as to the facts- see the Determination, (the plaintiff refers to and repeats pages 13-48 of the Plaintiff’s Submissions in Response to the Defendants Submissions dated 2 April 2008 (‘the Submissions’), in particular pages 16-48)
iiiFailed to consider the relevant evidence or matters before him in respect of whether these items were necessary or proper – (the plaintiff refers to and repeats pages 16-48 of the Submissions, the Affidavits of Mr Gene Volovich sworn 3 April 2008 and 2 November 2007, the Affidavit of Mr James Cook sworn 10 July 20080.
cfurther erred in the exercise of his discretion in fettering such discretion by being guided by extraneous matters (see pages 2-4 of the Determination and the plaintiff refers to and repeats pages 89-95 of the Submissions) and relying on the Determination.
Order Sought:
1 The items be allowed in full; or
2Alternatively, the items be allowed insofar as the entitlement is concerned and the matter be remitted to the Deputy Registrar to determine the quantum that ought to be allowed; or
3Alternatively, the matter be referred back to the deputy registrar for further taxation.
58 Part B of the amended notice related to different items but raised similar grounds. The items dealt with in part B of the amended notice include item 583. The items covered by that part of the notice are items 286, 298, 299, 372‑376, 382, 389-392, 402, 407-410, 415-418, 452, 453, 454, 457, 458, 479, 480, 490, 491, 502, 503, 508-515, 524-532, 559, 570, 571, 583, 586 ($330), 587, 593, 596(b)-(h).
59 Part C of the amended notice related specifically to item 583(E)(i) and (ii) and the question of instructions for brief. Here, the argument was spelt out in much more detail by the plaintiff and was cross referenced to the extensive submissions filed. I set out the objection:
“C. Instructions for Brief
Item Numbers: 583(E)(i)(ii) (IFB – document list)
Grounds of Objection:
1The deputy registrar erred in disallowing the plaintiff’s entitlement to costs relating to the defendants’ document list served pursuant to consent orders made on 18 July 2006, in respect of the receipt and scanning of the document list, on the grounds that the Deputy Registrar:
amade an error of law and applied a wrong principle in disallowing the plaintiff’s entitlement to the costs of the proceeding pursuant to the plaintiff’s acceptance of the defendants offer of compromise (refer to Rule 26.03 (7)) and pursuant to the express written terms of the defendants’ offer that expressly offered to pay the plaintiff’s costs, which was accepted by the plaintiff to resolve the proceedings.
bmade an error of law and applied a wrong principle in failing to determine whether these items were necessary or proper within the meaning of the Rules, in that, he failed to determine the merits of each item and whether each item was, first, necessary or secondly, whether the item was proper, taking into account the legal principle that what constitutes ‘proper’ at law includes items that may be considered unnecessary with the benefit of hindsight but were properly incurred at the point in time that the costs were incurred, and not whether such items were necessary or proper determined retrospectively, or with the benefit of hindsight.
cerred in the exercise of his discretion in that he:
iWas guided by wrong principles – refer to the principles under paragraphs 2(c)-(h) below.
iiMade a mistake as to the facts – refer to paragraphs 2(c)-(h) below (the plaintiff refers to and repeats pages 13-48 of the Submissions and the Chronology in the Submissions and pages 2-16 of the May Submissions).
iiiFailed to consider the relevant evidence or matters before him in respect of whether these items were necessary or proper – the plaintiff refers to and repeats pages 13-48 of the Submissions, the Affidavits of Mr Gene Volovich sworn 3 April 2008 and 2 November 2007, the Affidavit of Mr James Cook sworn 10 July 2008.
2The deputy registrar erred in applying his erroneous Determination to items in the body of the bill of costs and the disbursements (as outlined above) that were not part of the ‘instructions for brief’ item, and also applied his erroneous Determination to the ‘instructions for brief’ items in the bill of costs, on the grounds that the Deputy Registrar:
amade an error of law and applied a wrong principle in disallowing the plaintiff’s entitlement to the costs of the proceeding pursuant to the plaintiff’s acceptance of the defendants offer of compromise (refer to Rule 26.03 (7)) and pursuant to the express written terms of the defendants’ offer that expressly offered to pay the plaintiff’s costs, which was accepted by the plaintiff to resolve the proceedings.
bmade an error of law and applied a wrong principle in failing to determine whether these items were necessary or proper within the meaning of the Rules, in that, he failed to determine the merits of each item and whether each item was, first, necessary or secondly, whether the item was proper, taking into account the legal principle that what constitutes ‘proper’ at law includes items that may be considered unnecessary with the benefit of hindsight but were properly incurred at the point in time that the costs were incurred, and not whether such items were necessary or proper determined retrospectively, or with the benefit of hindsight.
capplied a wrong principle in deciding the necessity or propriety of the ‘computer inspection’ by reference to the ultimate result relating to the quantity of documents that supported the plaintiff’s claim. (the plaintiff refers to and repeats the May Submissions in this respect, in particular pages 1-3 and pages 1-5 of the Submissions).
dapplied a wrong principle in having regard to the proportionality of the amount recovered at settlement to the cost of undertaking inspection of the defendant’s documents made available for inspection pursuant to orders of the court made on 28 April 2006, 19 May 2006, 1 June 2006, 5, 7, 18 July 2006, 5, 12 and 29 September 2006.
100 In its submission in response to the defendants dated 2 April 2008, the plaintiff went to a great deal of trouble to articulate the work that was involved in the computer inspection and the reasons for it.[43] Those submissions appear to have been completely ignored by the Registrar in considering whether or not the costs claimed of the computer inspection were necessary or proper. I have read the submissions thoroughly and they are cross referenced to a number of documents and evidence that was before the Registrar. The submissions, in my view, make out a compelling case for a finding that the costs of the computer inspection were necessary and proper. I accept those submissions. In my judgment, the Registrar was in error by not acting on them.
[43]See paragraphs 49-165
101 In my judgment, there existed clear uncontroverted evidence that showed that the defendants were acting against the interests of the plaintiff whilst employed by it.[44] It was reasonable for the plaintiff to assume that the defendants’ hard drives and the plaintiff’s hard drives used by the defendants’ whilst employed by the plaintiff may contain information which met the test of relevance, namely “it would, or would lead to a train of inquiry which would, either advance a party’s own case or damage that of his adversary”.[45]
[44]I was taken by Mr Van de Weil to Tab 3 of the plaintiff’s documents which is a series of email chains that clearly show the first and second defendants acting contrary to the plaintiff’s interest and destroying evidence of their wrongdoing.
[45]Mulley v Marney & Manifold (1959) 103 CLR 341 at 345 per Menzies J
102 The plaintiff submits the defendants had acted in breach of their duties to the plaintiff[46] and misused confidential information. The plaintiff point to the evidence that became available during the course of the proceedings and through discovery, that the defendants had deliberately engaged in fraudulent conduct by deleting, destroying, concealing and hiding documents in an attempt to conceal their evidence pertaining to their wrongdoing.[47] As I understand it, that evidence was never disputed by the defendants and could not have been. It was referred to by Judge Anderson himself in his reasons at 13.2 where he said:
“There was clear evidence that the defendants had downloaded material from the plaintiff’s computer system and had taken steps to hide their action.”
[46]Statement of Claim dated 24 October 2005 [inter alia, 13, 16, 26, 35] and Proposed Amended Statement of Claim dated 12 December 2006 [inter alia, 14, 21, 31, 32, 38] [Tab 2]
[47]I was taken by Mr Van de Weil to Tab 3 of the plaintiff’s documents which is a series of email chains that clearly show the first and second defendants acting contrary to the plaintiff’s interest and destroying evidence of their wrongdoing.
103 Armed with this evidence, the plaintiff was justified in pressing the discovery issue in the way that it did. Importantly, the costs incurred by the plaintiff in completing the discovery process, in my judgment, was necessary or proper in the full context of the issues raised in the proceeding.
104 The protracted interlocutory proceedings for discovery resulted in the production from forensic computer experts of a long list of files or documents that were used by the parties in the proceeding. I accept the plaintiff’s submission that the lists produced by the computer experts was akin to an affidavit of documents. I accept the plaintiff was entitled to scan the list of documents for the purposes of determining whether there were in existence documents relevant to the proceeding. I accept the plaintiff’s submission that the list of documents produced as a result of the computer inspection was itself used by the defendants to claim privilege and/or confidentiality over certain documents on the hard drives. I accept the list of documents produced was used by the plaintiff as a reference point in correspondence with the defendants and I accept that the list was used to demonstrate that a document entitled “client list” had been deleted but subsequently recovered by IT experts. The use of the results of the computer discovery in these various ways, in my view, makes it unarguable that the costs of the computer inspection were necessary or proper.
105 The argument before me proceeded on the basis that I should decide what the parties in argument referred to as “the global issue”, namely whether or not the Registrar had wrongly decided that the plaintiff was not entitled to the costs of instructions for brief, item 583. I have concluded that the Registrar did fall into error and that the plaintiff should succeed on this issue on review. There was no argument addressed to me on quantum or the amount of each item within item 583.
106 Before the Registrar, the defendants had lodged objections to the items that are the subject of review on grounds other than those decided by the Registrar in his ruling concerning item 583. In respect of some of these items, the Registrar had disallowed some of those objections and they have been resolved. In respect of other items however, the defendants had lodged objections which, because of the global ruling of the Registrar, were not decided. On the review, Mr Lapirow handed me a schedule listing those items which each fall into either schedule A or schedule B of the plaintiff’s amended notice of application to review. I understand the defendants still wish to press their objections to these items which are still to be decided by the Registrar. The items are identified in the schedule with a comment in the column headed “Remaining Objection”. The items there identified are items numbered 286, 298, 299, 303, 304, 305, 306, 311, 312, 313, 314, 316, 359, 372, 374, 385, 386, 391, 392, 398, 399, 415, 416, 417, 418, 420, 421, 467, 468, 469, 470, 471, 472, 479, 480, 490, 491, 510, 511, 527, 528, 536, 537, 538, 559, 570, 571, 586, 587, 592, 593, 594, 595, 596 and 596. I propose to remit those items to the Costs Court to be decided.
107 Otherwise the plaintiff succeeds on review and the items listed in schedule A, schedule B, schedule C and schedule D of the Amended Notice of Application to Review dated 21 November 2008 (save for those items listed in the paragraph above) should be allowed in full except for item E of item 583, where the rate for scanning should be allowed at 0.30 cents per page and not the amount claimed in the amended bill of $3.00 per page. This is in accordance with the concession made on review by the plaintiff. In my judgment, the claim for scanning was necessary or proper. A fair and reasonable amount for this item is 0.30 cents per page.
108 Schedule H of the Amended Notice of Application to Review dated 21 November 2008 relates to the costs of the taxation. The Registrar awarded the costs of the taxation to the defendants. In my view, this order followed on from the erroneous decision not to allow the plaintiff the costs of the computer inspection item 583, which had the effect of reducing the amount of the bill of costs taxed dramatically. I set aside the Registrar’s ruling as to costs of the taxation. The plaintiff’s costs of the taxation should be allowed in full. I propose to remit the question of the calculation of the plaintiff’s costs of the taxation to the Costs Court.
109 For these reasons, I propose the following orders and will hear the parties on the form of these orders:
(1) The orders of the Registrar made 4 September 2008 whereby the Registrar taxed off the plaintiff’s amended bill of costs the amount of $488,120.57 and taxed and allowed the plaintiff’s costs in the sum of $70,929.43 and fixed the taxation fees in the sum of $5,790.65, be set aside.
(2) The plaintiff’s amended bill of costs be remitted to the Costs Court for taxation and the items referred to in schedule A, schedule B, schedule C and schedule D of the plaintiff’s Amended Notice of Application to Review dated 21 November 2008 (save for those items where the defendants have a remaining objection yet to be decided, and sub-item E of item 583, scanning, where the rate for scanning should be allowed at 0.30 cents per page), be allowed in full, in addition to the sum of $70,929.43 allowed by the Registrar in his Order of 4 September 2008.
(3) The defendants’ objections yet to be decided to items 286, 298, 299, 303, 304, 305, 306, 311, 312, 313, 314, 316, 359, 372, 374, 385, 386, 391, 392, 398, 399, 415, 416, 417, 418, 420, 421, 467, 468, 469, 470, 471, 472, 479, 480, 490, 491, 510, 511, 527, 528, 536, 537, 538, 559, 570, 571, 586, 587, 592, 593, 594, 595, 596 and 596 be remitted to the Costs Court for determination.
(4) The Registrar’s ruling that the plaintiff pay the defendants’ costs of the taxation is set aside. I order that the defendants pay the plaintiff’s costs of the taxation before the Registrar in full, the amount of such costs to be taxed by the Costs Court.
(5) The defendants pay the plaintiff’s costs of and incidental to the review including the review before Judge Lewitan, such costs to be taxed by the Costs Court.
(6) The plaintiff’s costs of and incidental to the review before Judge Lacava, to be taxed by the Costs Court on an indemnity basis.
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