Clone Pty Ltd v Players Pty Ltd (No 3) - [2020] SASC 29

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
CLONE PTY LTD v PLAYERS PTY LTD & ORS (No 3)
[2020] SASC 29
Reasons for Ruling of Auxiliary Judge Norman a Master of the Supreme Court
20 February 2020
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - TAXATION AND OTHER FORMS OF ASSESSMENT - PRINCIPLES OF TAXATION OR ASSESSMENT
Costs of a discontinued application - discontinuance of application for production of files relating to an adjudication - rule 107(4) provision that unless parties agree or court orders to the contrary a party against whom a matter is discontinued is entitled to costs arising from the claim up to the time of receiving notice of the discontinuance - proper approach to the exercise of that discretion is that as a general rule the successful party is entitled to costs but in an appropriate case a court will make an order even where there has been no hearing on the merits if it is able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs - finding that plaintiff had acted unreasonably in informing defendants that it was seeking to obtain an electronic file to see if it could assist in substantiating remaining items in itemised schedule of costs for adjudication, but having been advised subsequently that it was not seeking to rely on the file, in not informing the defendant of this until after the application had been issued - no order as to costs of the application.
Re the Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622, applied.
RG & RT Trott Pty Ltd v A & G Engineering Pty Ltd [2014] SASC 80; Pentroth Pty Ltd v Kirschild Pty Ltd [2006] SASC 356; Samowitz v Wilson [2013] NSWSC 1194; Transfield Services (Australia) Pty Ltd v Gaha [2012] NSWSC 865; Mineralogy Pty Ltd v National Native Title Tribunal [1998] FCA 1700, considered.

CLONE PTY LTD v PLAYERS PTY LTD & ORS (No 3)
[2020] SASC 29

These are applications as to the costs of the defendants’ application dated 4 December 2019 (FDN 258), which had sought an order for the production of the electronic file of Grope Hamilton, the former solicitors for the plaintiff.
That application had been listed for argument before me on 30 January 2020 but in a letter dated 23 January 2020 the defendants’ solicitors advised the plaintiff’s solicitors that it was no longer pursued.
At the hearing on 30 January when Mr Ericson of counsel appeared for the plaintiff and Mr Whitington with Mr Cogan of counsel appeared for the defendants, Mr Whitington sought that there be no order as to the costs of the application, or alternatively that they be costs in the adjudication, whereas Mr Ericson sought an order that the plaintiff have its costs of the application.
I heard submissions and reserved my decision.
Background
The plaintiff’s costs of the trial in these proceedings are being adjudicated. This process has extended over many months and is continuing. Mr Ericson is appearing for the plaintiff and Mr Cogan for the defendants.
Orders of 11 November 2019
At a hearing on 11 November 2019 orders were made that any application by the defendants or other processes, together with supporting affidavits in relation to inspection of records, were to be filed and served by 2 December 2019.
It was further ordered that any responding documents, affidavits etc to be relied upon by the plaintiff were to be filed and served by 23 December 2019.
Dates for written submissions by the parties were fixed and the matter was adjourned for argument on 30 January 2020 at 10.00am.
Application of the defendants dated 4 December 2019
On 4 December 2019 the defendants issued and served an application (FDN 258) seeking an order that the plaintiff produce for inspection all parts of the electronic file of Grope Hamilton, former solicitors for the plaintiff, which related to disputed items from 5035 and following appearing in the plaintiff’s itemised schedule of costs for adjudication dated 11 March 2008 (FDN 146) including electronic records from which a bundle of hard copy documents had been extracted.
A further order was sought that the Grope Hamilton electronic records be made available to the defendants’ solicitors for inspection in electronic format in such a manner that the content of, and the metadata associated with, each record or document was accessible.
The application was based on rr 131, 271(3), 274(2), 274(4)(a) and 274(4)(b).
First affidavit of Mr Dart (FDN 259)
In an affidavit in support of the application sworn by Mr Jack Dart, solicitor for the defendants, on 4 December 2019, he referred to the orders made on 11 November 2019 and exhibited various email communications between the parties during the period 17 October 2019 to 6 November 2019.
He testified that pursuant to those communications the defendants’ solicitors had sought access to and inspection of the electronic records of the Grope Hamilton electronic file referred to in correspondence from the plaintiff’s current solicitors, Finlaysons.
Mr Dart also referred to and exhibited a letter received from Finlaysons dated 9 October 2019 which stated, inter alia, that they were currently seeking to obtain Grope Hamilton’s electronic file. The stated reason for obtaining this electronic file was to see if it could assist in substantiating any of the remaining items in the plaintiff’s itemised schedule of costs for adjudication filed on 11 March 2008.
He testified that on 4 November 2019 he had received an email from Finlaysons confirming that that firm had received a bundle of hard copy documents from Grope Hamilton which had been sourced from the latter’s electronic records but that there were some documents missing, and that when documents were located they would be made available for inspection.
He further testified that on 6 November 2019 he had received an email from Finlaysons stating that there was no entitlement under the rules for the defendants to have access to the electronic records or electronic copies of the documents. Further, it was stated in that letter that the hard copy file only would be made available for inspection on 14 November 2019, and that the electronic records of those documents and electronic copies would not be made available.
Mr Dart testified that the defendants’ solicitors wished to inspect the electronic records of the Grope Hamilton electronic file from which the documents sought to be relied upon by the plaintiff were sourced so that they could ascertain, inter alia, the dates of creation and/or modification of each record or document sought to be relied upon by the plaintiff.
Defendants’ submissions of 4 December 2019 (FDN 260)
Contemporaneously with the filing of the defendants’ application and Mr Dart’s affidavit, the defendants filed their written outline of submissions (FDN 260). These referred to the background correspondence and to rr 271 and 274.
It was argued by them that because it was clear from Finlaysons’ letter of 9 October 2019 that the plaintiff intended to rely upon Grope Hamilton’s electronic file to support its claim for costs, it was reasonable to infer that electronic copies of the documents, in particular the date of creation and/or modification record, would be highly relevant to enquiries about the contemporaneity of any individual electronic record sought to be relied upon by the plaintiff in the costs adjudication. It was submitted that the electronic file was both the primary record and a complete record. The defendants referred to RG & RT Trott Pty Ltd v A & G Engineering Pty Ltd [2014] SASC 80 where Judge Dart had considered the breadth of the definition of a “document” in r 4 and he had found that a document was anything that recorded information.
Mr Rydon’s affidavit of 20 December 2019 (FDN 262)
In an affidavit of its solicitor, Mr Rydon, sworn on 20 December 2019 (FDN 262) the plaintiff opposed the orders sought by the defendants.
Mr Rydon set out a history of the adjudication of costs, now spanning some 12 years. He testified that he had been attending the adjudication and had assisted Mr Ericson of counsel by extracting hard copy documents for production in relation to the items claimed. He said that a total of 5,034 items had either been taxed or reserved, and this represented 83.77% of the total items in the claim for costs. In November 2018 the plaintiff’s former solicitors, Grope Hamilton, had provided its present solicitors, Finlaysons, with a hard copy file containing documents relevant to the adjudication of costs.
During the adjudication, he testified, it had become apparent that a number of documents were missing from the hard copy file provided, so Finlaysons had resolved to obtain copies of these documents from Grope Hamilton in order to fill gaps in the hard copy file. He testified that contact had been made with Grope Hamilton with an enquiry as to whether it could provide a copy of its electronic file to Finlaysons. The purpose of this request was to enable the latter to print off copies of the missing documents so that these could be used during the adjudication to substantiate various items.
Mr Rydon testified that he had written to the defendants’ solicitors on 9 October 2019 explaining that the plaintiff was seeking to obtain Grope Hamilton’s electronic file and that it would not concede any items which were capable of being substantiated by these. By this, he had meant that the plaintiff was seeking to supplement its hard copy file with documents printed from the electronic file. However, it did not mean that the plaintiff intended to rely on the electronic file for the purposes of the assessment of its claim for cost. He said this position had been explained to the defendants’ lawyers in an email of 6 November 2019.
Mr Rydon testified that copies of the missing documents were ultimately requested from Grope Hamilton on around 23 October 2019.
He said that on 4 November 2019 Grope Hamilton had provided Finlaysons with a number of hard copy documents relating to approximately 100 items. These documents had been printed out from Grope Hamilton’s computer system.
On the same day, Mr Rydon had emailed Mr Dart to inform him of the receipt of these documents and he told him that these could be made available for inspection. However, no inspection had, as at the date of Mr Rydon’s affidavit, been undertaken.
On 19 November 2019 Mr Rydon had spoken to Mr Hamilton who had told him that Grope Hamilton would not be providing an electronic copy of their electronic file to Finlaysons.
Subsequently, the defendants had filed the application supported by written submissions and Mr Dart’s affidavit.
Mr Rydon testified that the scope of the application related to some 550 disputed items in the claim for costs and the documents sitting in support of same. Some of them related to claims for correspondence and others were in relation to emails.
He testified that if the application by the defendants was granted, the process involved in preparing the electronic file and metadata for inspection would be time consuming and expensive for the plaintiff. He had been informed that a forensic computer expert would need to be retained to image and create a duplicate copy of the electronic file.
He amplified on this in his affidavit at paragraphs 25-28.
Plaintiff’s outline of submissions (FDN 261)
Contemporaneously with the filing of Mr Rydon’s affidavit, the plaintiff filed its outline of submissions on 23 December 2019 (FDN 261). These set out the background to the matter. It was indicated that despite the advanced stage of the adjudication, and the manner in which it had been conducted, the defendants had never previously agitated any application of the type in question.
It was submitted that the application was defective and that it should fail.
First, the electronic file was not within the plaintiff’s possession, custody or control.
Secondly, the request was beyond the scope of rr 271(3) and 274(4).
Thirdly, no cogent evidence had been put forward as to why such an intrusive order was necessary.
Fourthly, claims for privilege would be made.
All of these submissions were outlined in more detail later in the written outline.
Second affidavit of Mr Dart (FDN 263)
On 24 January 2020, the defendants filed the second affidavit of Mr J Dart (FDN 263). He referred to the defendants’ interlocutory application and his supporting affidavit which had been served on the plaintiff. He further referred to the letter from Grope Hamilton to Griffins Lawyers of 16 December 2019. He testified that in consequence, on 23 January 2020 the defendants’ solicitors had written to the plaintiff’s present solicitors advising, inter alia, that the defendants no longer sought the orders the subject of the interlocutory application.
Defendants’ submissions
Mr Whitington and Mr Cogan each addressed the court in relation to the consequences of the withdrawal of the defendants’ application.
Mr Whitington
Mr Whitington submitted that either there should be no order for costs, or alternatively that the costs be costs in the adjudication.
He said that it was only after the defendants had received the letter from Grope Hamilton of 16 December 2019 (exhibit JFD5 to the second affidavit of Mr Dart) that they had decided to no longer pursue their application.
In a letter of response dated 23 January 2020 (exhibit JFD6 to the second affidavit of Mr Dart) Mr Dart had explained the reasons why this was the case. He explained that this was by reason of various admissions made and the disclosure referred to in the Rydon affidavit, the defendants’ submissions, and in the Grope Hamilton letter of 16 December 2019.
Mr Whitington contended that it was entirely appropriate for the defendants to have brought the interlocutory application at the time they did, and it was only after the receipt of the Rydon affidavit, the plaintiff’s submissions and the 16 December 2019 Grope Hamilton letter that it had become apparent that there was no practical utility in pursuing the application any further - and in particular by reason of the notification from the plaintiff that it was not relying on Grope Hamilton’s electronic file.
Mr Whitington noted, however, that if the plaintiff was to subsequently change its position with respect to and in reliance upon Grope Hamilton’s electronic file, then the defendants reserved their rights to reagitate the matter.
In further explanation of the withdrawal of the defendants’ application, Mr Whitington referred to paragraph 14 of the Rydon affidavit which he submitted contained an effective admission that the plaintiff’s position in respect to reliance on Grope Hamilton’s electronic file had not been clearly conveyed, or was in any event ambiguous in the email from Finlaysons to Griffins Lawyers of 6 November 2019.
He submitted that paragraph 14 had specifically stated that although the plaintiff was seeking to supplement the hard copy file with documents printed from the electronic file, this did not mean that it intended to rely, within the meaning of r 271(3), on the electronic file for the purposes of an assessment of its claim for costs.
In contrast, Mr Whitington submitted, the previous 6 November 2019 email had by no means made it clear the fact that the plaintiff was not intending to rely upon Grope Hamilton’s electronic file in the ongoing costs adjudication. At best, he put, it was ambiguous and equivocal.
In any event, he submitted, the so‑called position referred to in paragraph 14 of Mr Rydon’s affidavit had certainly not been clearly explained in the 6 November 2019 email, and it had only been on receipt of the Rydon affidavit and the plaintiff’s submissions that its position had been made clear.
Further, Mr Whitington submitted, it was not until the defendants’ solicitors had received the Rydon affidavit on 23 December 2019 that they were informed for the first time that Grope Hamilton had advised Finlaysons on 19 November 2019 that it would not be providing Finlaysons with an electronic copy of its electronic file – paragraph 20 and exhibit MAR-1 of the Rydon affidavit.
He put that had that fact been made clear to the defendants’ solicitors - as well as the fact that the plaintiff was not relying upon Grope Hamilton’s electronic file in the costs application - then the defendants were unlikely to have brought the interlocutory application in the first place.
The date of the advice to Finlaysons of 19 November 2019 had been two weeks before the defendants’ solicitors had filed the application but no attempt had been made by Finlaysons in the meantime to advise them of Grope Hamilton’s position in this regard during that period.
He also submitted that it was entirely appropriate for the defendants’ solicitors to have waited until all documents sourced from Grope Hamilton’s electronic file had in fact been received by Finlaysons before they inspected those newly obtained documents, so as to avoid unnecessary duplication. In this regard, he noted that in an email sent to the plaintiff’s solicitors on 5 November 2019 the defendants’ solicitors had stated that it was not clear to them whether all recently obtained documents relevant to the disputed costs items had in fact been provided by Grope Hamilton to Finlaysons, or whether there were further documents to come. That issue, he put, had not been addressed in the Finlaysons’ 6 November 2019 email, instead it was only after receipt by the defendants’ solicitors of the Rydon affidavit and the plaintiff’s submissions that it had become clear that all documents recently located by Grope Hamilton were then in the possession of Finlaysons.
Mr Whitington noted that Mr Dart had inspected those newly obtained documents relating to particular cost items on 10 January 2020.
In the circumstances, he submitted, it was entirely appropriate for the defendants to have brought the interlocutory application at the time that they did.
He also addressed the matters revealed and explained – and, he put, conceded – in the letter from Grope Hamilton to the defendants’ solicitors on 16 December 2019. These had shone a new light on the matter and had provided further justification for the bringing of the interlocutory application. He submitted that the defendants’ solicitors would never have received this Grope Hamilton letter but for the bringing of their application. He referred to the contents of this letter. It had indicated that on 3 October 2019 that firm had received a letter from Finlaysons indicating that in effect they had been unable to locate some of the documentation on the file. Finlaysons had written to Grope Hamilton saying that in addition, some items claimed had lacked sufficient details so as to provide the taxing Master a proper flavour as to the content of calls etc. There were also instances where the handwriting of Mr Hamilton or Ms Karagiannis was “hieroglyphic” or unable to be easily understood. Finlaysons had informed Grope Hamilton that as taxing Master I had indicated to the parties that I was receptive to a course of action whereby the solicitors who were involved in the litigation would provide further information or explanation in support of the currently unsubstantiated claims, so items had been reserved in those instances where the claims required further evidence and/or transcription.
Grope Hamilton had indicated in this 16 December 2019 letter that it was against this background that the plaintiff’s solicitors, Finlaysons, had provided it with a list of items where Finlaysons had been unable to locate any substantiating documentation and/or where a transcription was required and/or some further explanation regarding the substance of particular attendances.

Grope Hamilton said in the letter that having received the list, and without charge to its former client, it had spent considerable time searching through the records which it could still access, seeking where possible to identify an electronically filed copy of an original document. It had located, for an example, copies of documents being attachments to emails still stored on the system.
Another category was where there was a document on the file but it required elucidation and/or transcription of “hieroglyphical” notes. In such cases, individual “aide memoire” type file notes had been provided in the form of a stapled copy of the document on the file. This had represented Grope Hamilton’s endeavours to assist Finlaysons in providing information or explanation in support of unsubstantiated items.
There had been no suggestion that the aide memoires were prepared for anything other than in response to requests for the provision of further information or explanations.
As a final category, Grope Hamilton explained in the 16 December 2019 letter, it had prepared aide memoire type memoranda in cases where there had been a claim made in relation to some attendance but no documentation had been able to be located by Finlaysons on the file. With respect to this category, it was explained, there might or might not have originally been a document brought into existence evidencing the attendance, but if it had ever existed it had not been located either on the file by either Finlaysons or by Grope Hamilton. The only purpose of the aide memoires was to enable the taxing Master to decide whether the item involved work relevant to the prosecution of the action.
In the letter to the plaintiff’s solicitors of 23 January 2020 the defendants’ solicitors had noted that the various aide memoire referred to in the Grope Hamilton letter of 16 December 2019 had not been made available to them during Mr Dart’s document inspection at Finlaysons on 10 January 2020. The defendants had put the plaintiff on notice that they reserved their rights to object to any of the aide memoire being provided as part of the ongoing costs adjudication in the absence of sworn evidence from Mr Hamilton and/or other relevant employees of Grope Hamilton deposing on oath to the matters the subject of the relevant aide memoire.
Finally, the defendants’ solicitors had in this letter addressed the print out of word documents from Grope Hamilton’s electronic file. They reserved their rights to object to any costs items during the ongoing costs adjudication in respect of which the only evidence in support of the costs item was a print out of the subject document from Grope Hamilton’s electronic file in circumstances where there was no original document or copy of the original document, such that the provenance of the print out was unclear or unsubstantiated, particularly in circumstances where the plaintiff had advised that it did not seek to rely upon Grope Hamilton’s electronic file.
In consequence of all of these matters, Mr Whitington submitted, the defendants had decided not to pursue their application.
Mr Whitington also referred to paragraphs 12, 18 and 21 of the defendants’ outline of submissions (FDN 260).
Paragraph 12 had stated that it had been clear from Finlaysons’ letter of 9 October 2019 (exhibit JFD2 to Mr Dart’s first affidavit), that the plaintiff had intended to rely upon Grope Hamilton’s electronic file to support its claim for costs. That letter had said that Finlaysons were currently seeking to obtain Grope Hamilton’s electronic file and that the plaintiff was not in a position to concede any items which might be capable of being substantiated by the electronic file.
Paragraph 18 had stated that the metadata, and in particular the dates of creation and modification of documents, would be highly relevant to any enquiry about the contemporaneity of any individual electronic records or documents sought to be relied upon by the plaintiff in the costs adjudication.
Paragraph 21 had stated that given the broader definition of a document in r 4, as costs claimant the plaintiff was required to produce the electronic records of Grope Hamilton’s electronic file on which it relied.
It was clear, Mr Whitington submitted, that as at 4 December 2019 - when the defendants issued their application – the plaintiff would be relying on the electronic file.
He further referred to Finlaysons’ letter of 9 October 2019 in which Mr Rydon wrote that:
For instance, we are currently seeking to obtain Grope Hamilton’s electronic file. We are therefore not in a position to concede any items which may be capable of being substantiated by the electronic file. Once we have the electronic file we will review Clone’s position and revert to you with further concessions if necessary.
In response, he said, Mr Dart wrote in an email on 17 October 2019:
Are you able to advise when you expect to receive the electronic file from Grope Hamilton?
Mr Rydon had responded on 17 October 2019 that:
We will be in a position to provide you with a response shortly.
On 4 November 2019 Mr Rydon wrote to Mr Dart advising:
We confirm that we have just now received a bundle of hard copy documents from Grope Hamilton which have been sourced from their electronic records.
In an email to Mr Rydon of 5 November 2019, Mr Dart summarised the earlier communications and said:
It remains our clients position that no inspection should take place until all relevant documents from the Grope Hamilton electronic file have been provided to you and are available to inspect.
Mr Rydon responded to Mr Dart on 6 November 2019 indicating that documents were extracted, printed and provided to Finlaysons, but that the latter had not been provided with electronic copies.
He further indicated that he did not understand the basis for the defendants’ request to inspect the electronic records or the electronic file itself, as there was no entitlement under the rules for access to this documentation, and no orders had been made to that effect.
In the light of this information, Mr Whitington submitted, it was appropriate that the defendants had issued their application.
Mr Cogan’s submissions
Mr Cogan supplemented these submissions. He referred to the practice of the production of electronic files and tabled an example. It was a simple process, he submitted, to produce and inspect electronic files. Further, it was clear that electronic documents were contemplated within the provisions of the Legal Practitioners Act. He referred, in particular, to ss 5 and 39(1) of that Act in the context of the delivery up of papers.
In the circumstances, he submitted, as at the date of issue of the defendants’ application, they had every reason to expect compliance.
Mr Cogan referred to the authorities relating to discontinued applications, and in particular, to Pentroth Pty Ltd v Kirschild Pty Ltd [2006] SASC 356.
Mr Cogan refuted any suggestion that the defendants’ application was made in an attempt either to delay the progress of the taxation or was an attempt to suggest that there was some form of dishonesty and fraud. The files obviously existed in electronic form, he said, and were obtained and printed, the process of which was only marginally easier than the process of copying an electronic file.
He submitted that information about electronic records was known as metadata which could usually be accessed by viewing a file in file explorer, a file management application integral to Windows or in some similar file management system. It was commonplace nowadays for electronic inspections to take place and the request was routine. He submitted that Grope Hamilton’s refusal to provide the documents was inexplicable as it was such a simple process and there was no reason why electronic documents could not be provided. The request had been totally innocuous.
However, the reason why the defendants had decided not to pursue their application was as stated by Mr Whitington, namely on the basis that Grope Hamilton were not providing the documents to Finlaysons and that the plaintiff, Clone, was not going to pursue Grope Hamilton for that information.
The application had been made by the defendants on reasonable grounds, a reasonable explanation had been provided for not pursuing it, and for this reason, he submitted, there should be no order as to costs.
Mr Ericson’s submissions
Mr Ericson opposed the orders sought by the defendants and submitted that the plaintiff should be awarded the costs of and incidental to the withdrawn application. A default rule applied, he submitted, that a party withdrawing an application would in the normal course be liable for costs incurred by the opposing party unless appropriate reasons for a contrary order could be established.
He expressed concerns at the delay in the adjudication process which had been further contributed to by the abortive application. He further indicated that the issue had not been finally resolved and there was a need to bring on the adjudication.
He submitted that it was clear that the defendants were not relying on the electronic files and that the application, if pursued, would have failed.
Mr Ericson submitted that the letter of 6 November 2019 was not ambiguous as had been asserted by the defendants. He said that Mr Dart in his affidavit of 4 December 2019 (FDN 259) had testified that Griffins Lawyers wished to inspect the electronic records of the Grope Hamilton electronic file from which the documents sought to be relied upon by Clone in the costs adjudication were “sourced” so that Griffins Lawyers could ascertain, inter alia, the dates of creation and/or modification of each record or document sought to be relied upon by Clone.
He noted that when the issue first arose, he had indicated to the court that the plaintiff’s position was that it would only be tendering the paper documents and was not relying on an electronic file. This had always clearly been the plaintiff’s position and it was understood by the defendants as such. Accordingly, the court should proceed on the basis that that was thereby understood, and any suggestion that the defendants’ application was brought in the belief that the plaintiff was seeking to tender the electronic file was not something which the court could accept on the evidence.
He contended that a solicitor’s affidavit was prima facie to be believed unless it was something incredible and this was not the case. The correspondence from the plaintiff made this position clear, and the affidavit indicated that it was understood by the defendants, so accordingly the defendants’ argument that they did not understand that the plaintiff was seeking to rely only on the paper documents was not well founded.
He emphasised that it had always been the principal argument that if the plaintiff was not tendering the electronic file, then it would not be relying on it.
As to the argument put by the defendants that they were told that the file was not going to be delivered by Grope Hamilton, this did not change the position, as it had been made clear in the letters from the plaintiff’s solicitors that they did not have the file.
Mr Ericson also submitted that the test for disclosure of documents related to possession, custody or power of a party, so it was quite open to the defendants to argue that it was within the legal power of the plaintiff to compel the production of the documents. He submitted that the defendants’ application, on their own argument, was premature.
Noting that the defendants had submitted that it was reasonable in the circumstances for them to have brought the application, the proper test relating to allowing costs was not one of reasonableness. A quite reasonable application which was finely balanced could be brought, but if it was unsuccessful then the opposing party would receive the costs despite the fact that there might have been reasonable grounds for bringing the application.
Mr Ericson concluded by submitting that a further reason why costs should be awarded against the defendants was because by bringing and withdrawing the application and they then saying that they would be attacking at a different angle, was inappropriate. This would potentially cause more procedural argument.
In all the circumstances, there was no reason not to follow the general rule that when a party brought an application and withdrew it, the costs should be awarded in favour of the party against whom the application was brought. At the end of the day, the onus was on the defendants to persuade the court to depart from this general rule.
Mr Ericson also submitted that the plaintiff sought a certificate for counsel in relation to the argument.
Mr Cogan’s submissions in response
Mr Cogan made submissions in response. The defendants categorically rejected the assertion that they had been guilty of delay. It was not the defendants who had had to go back to hunt up records. It was not they who had refused to provide information in electronic format which could easily have been provided and which would have avoided the delays experienced. The defendants were not saying that the point would have to be reargued: all they had done was to reserve their position in this regard. The plaintiff had chosen to rely on the paper record and not the electronic record, and this might or might not have ramifications. It simply depended on what the record was. The defendants were not going to object for the sake of it.
As for the suggestion that costs should follow the event, Mr Cogan submitted that the Pentroth line of authority suggested that there was no starting point unless the issue had been litigated and determined. In the present case, the issue had not been determined, and that was the whole point of Pentroth.
Principles
The default order is r 107(4) which provides that unless the parties agree or the court orders to the contrary, a party against whom a matter is discontinued is entitled to costs arising from the claim up to the time of receiving notice of the discontinuance.
It is rarely, if ever, appropriate that where there has been no trial on the merits, for a court to determine how the costs of proceedings should be borne to endeavour to determine for itself the case on the merits or determine the outcome of a hypothetical trial. This is particularly the case where a trial on the merits would involve complex factual matters where credit could be in issue.
In Pentroth Pty Ltd v Kirschild Pty Ltd [2006] SASC 356 (Duggan, Gray and White JJ), White J in the context of the predecessor rules referred to 1987 r 52.03 which provided for the costs consequences of discontinuance:
Unless the Court otherwise orders or the parties consent, the party discontinuing or withdrawing shall pay the costs up until the date of delivery of the notice, of the party against whom the claim or defence was discontinued or withdrawn. No further order shall be required to enable the party against whom the claim or defence was discontinued to tax his costs.
In his reasons at [24] White J observed that the rule was not expressed, at least explicitly, in terms which limited the court’s general discretion. He said that it did not, for example, provide that the court may order otherwise if satisfied that special or unusual circumstances existed. He wrote:
… One might have expected express words if a limitation on the general discretion with respect to costs was intended. The circumstances in which parties may discontinue the whole or part of proceedings, and therefore the circumstances in which the court may be required to exercise the discretion with respect to costs, are diverse. That diversity suggests that r 52.03 should not readily be construed as containing an intention by the court that its discretion with respect to costs should be confined. …
He further wrote at [25]:
Furthermore, r 52.03 should be read as a whole. The second sentence in the rule, which provides that no further order shall be required to enable the party against whom the claim or defence was discontinued to tax its costs, indicates that the rule has a facilitative function. That is, when the discontinuing party does not seek any “order otherwise”, the other party is entitled to proceed to enforce its entitlement to costs without the necessity of approaching the court for any further order. Effect can be given to that facilitative purpose without construing the rule as, in addition, confining the general discretion of the court with respect to costs. These considerations count against acceptance of Mr Robertson’s submission.
In Samowitz v Wilson [2013] NSWSC 1194 it was held that a finding that a plaintiff acted reasonably in commencing and continuing proceedings would not be a sufficient reason to depart from the prima facie position that it should pay the defendant’s costs on discontinuance.
The proper approach to the exercise of the discretion as to costs on a discontinuance is that as a general rule the successful party is entitled to costs, but in an appropriate case a court will make an order even where there has been no hearing on the merits, if the court is able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action, and if it appears that both parties have acted reasonably in commencing and defending the litigation and their conduct continued to be reasonable until it was settled or became futile, the proper exercise of the discretion will usually mean that the court will make no order as to the cost of the proceedings: Re the Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; per McHugh J; Transfield Services (Australia) Pty Ltd v Gaha [2012] NSWSC 865; Mineralogy Pty Ltd v National Native Title Tribunal [1998] FCA 1700 and other cases.
Consideration
Delay
The plaintiff has submitted that the defendants have delayed the matter by the issue of their application.
I do not accept this submission.
My observation during the adjudication is that on many occasions its progress has been delayed by reason of the plaintiff having to go back to hunt up records to justify the items claimed. The defendants’ application for the production of electronic records, although not ultimately pursued, was, they have submitted, issued to render this process more efficient and to assist the court as to whether individual items could be substantiated or rejected, and thereby minimise the time spent on the adjudication.
Ultimately, the plaintiff has chosen to rely on the paper record and not the electronic record, and this might or might not have ramifications. That will remain to be seen.
What costs order is appropriate?
In order to determine whether the defendants are entitled to an order that there be no costs of their application, or alternatively, as the plaintiff seeks, it be awarded its costs, it is necessary to consider the background to the application and the circumstances of its withdrawal.
On 9 October 2019 the plaintiff’s solicitors wrote to the defendants’ solicitors stating, inter alia, that they were currently seeking to obtain Grope Hamilton’s electronic file and were therefore not in a position to concede any items which might be capable of being substantiated by the electronic file. (my emphasis)
In my view, this would suggest to the reader of that letter that the plaintiff was considering the use of the electronic file to substantiate its claims for costs.
Further, on 4 November 2019 the plaintiff’s solicitors wrote to the defendants’ solicitors and stated, inter alia, that they had just received a bundle of hard copy documents from Grope Hamilton “which have been sourced from their electronic records”.
This, likewise, would suggest to the reader that the electronic records had a part to play in the creation of hard copy documents.
Subsequently the defendants’ solicitors requested that these electronic records be made available for inspection, in addition to the hard copy documents sourced from them. This was followed up with the now withdrawn application.

In the circumstances of these representations from the plaintiff’s solicitors to the defendants’ solicitors, it could fairly be inferred that because the documents were provided by Grope Hamilton to the plaintiff’s solicitors on or about 5 November 2019, they were not in the latter’s possession prior to that date, notwithstanding that the costs adjudication process had been well underway by that stage.
It was the defendants’ view, as appears in paragraph 15 of their submissions (FDN 260), that the hard copy documents that the plaintiff’s solicitors had obtained from Grope Hamilton which were “sourced” from its electronic file, were only an extract of the data from the Grope Hamilton electronic file and that the electronic file itself contained or might contain additional relevant information. This view, as appears from paragraph 16 of the submissions, was that each record or document which had been stored electronically would in addition to its physical content have associated with it additional information about the record or document including its file name, file type, date of creation and/or date of modification and file size.
It was submitted at paragraph 17 that this information, known as metadata, would usually be accessed by viewing a file in file explorer, a file management application integral to the Windows operating system, or in some similar file management system.
It was further submitted in paragraph 18 that this metadata and in particular dates of creation and/or modification of records of documents would be highly relevant to an inquiry about the contemporaneity of any individual electronic record or document sought to be relied upon by the plaintiff in the costs application.
In the circumstances, as was submitted at paragraph 19, the electronic file was both the primary record and a complete record.
It was submitted at paragraph 21 that given the broad definition of a “document” in r 4, it was appropriate for the plaintiff as costs claimant to produce the electronic record of Grope Hamilton’s electronic file on which it relied.
On 6 November 2019, the plaintiff’s solicitors had written to the defendants’ solicitors by email and discussed the term “electronic file”. The email said that the term electronic file had never been used in a strict sense but rather it was, and had been, used to describe the electronic copies of the hard copy documents that had to be retrieved from the Grope Hamilton electronic archives, because they were not on the hard copy file originally provided to Finlaysons. The email added that Finlaysons had not been provided with electronic copies of those documents.
Subsequently, on 19 November 2019, Mr Hamilton, the principal of Grope Hamilton, had written that his firm would not agree to produce any part of the electronic record. He had added that it was a matter for the plaintiff – Clone – to produce documents in support of the items in respect of which they sought an allowance for costs.
It was two weeks after this that the defendants had filed their application of 4 December 2019, noting that Grope Hamilton would not agree to produce any part of its electronic record.
Subsequently, on 23 December 2019, the plaintiff had filed both the Rydon affidavit and Clone’s submissions, and it became apparent that the plaintiff did not intend to rely upon Grope Hamilton’s electronic file in the ongoing costs adjudication.
Paragraph 14 of the Rydon affidavit stated as follows:
On 9 October 2019, I wrote a letter to Griffins Lawyers (see JFD2 to the Dart Affidavit) explaining that we were seeking to obtain Grope Hamilton’s electronic file and that Clone would not concede any items which were capable of being substantiated by same. By this, I meant that Clone was seeking to supplement the hard copy file with documents printed from the electronic file. It did not mean that Clone intended to rely (within the meaning of Rule 271(3)) on the electronic file for the purposes of an assessment of its Claim for Costs. This position was explained to Griffins Lawyers in an e-mail dated 6 November 2019 (see JFD3).
It was the defendants’ position that this paragraph contained an effective admission that the plaintiff’s position regarding reliance on Grope Hamilton’s electronic file had not been clearly conveyed in the email from Finlaysons to Griffins Lawyers sent on 6 November 2019 (exhibit JFD 3 to Mr Dart’s affidavit of 4 December 2019).
In this email Finlaysons stated:
“Electronic file”
For the avoidance of any doubt, the term “electronic file” (as that term has been used from time to time throughout the adjudication) has never been used in a “strict sense”. Rather, this term was and is used to describe the electronic copies of the hard copy documents that had to be retrieved from the Grope Hamilton electronic archives because these were not on the hard-copy file originally provided to Finlaysons. We have been informed by Grope Hamilton that the storage of the “electronic file” is spread between both a “hard drive” and a server. These had to be individually searched to identify the relevant documents. The documents were then extracted, printed and provided to Finlaysons. We have not been provided with electronic copies of these documents.
In any event, we do not understand the basis for your clients’ request to inspect the “electronic records” or the “electronic file” itself. There is no entitlement under the rules for your clients to have access to the “electronic records” or electronic copies of the documents. No orders have been made to this effect.
In your e-mail you note that “the electronic records of the Grope Hamilton electronic file should be made available to us so that we may ascertain the dates of each document on the electronic file”. This is the first time that Griffin Lawyers have raised this despite the adjudication being afoot since March 2019. Thousands of documents have already been examined by Mr Cogan during the course of the adjudication, as well as some one hundred documents which were made available for inspection on 28 February 2019. Despite the vast quantity of documents already examined by Mr Cogan, the Players Parties have never made a request for the “electronic records” or “electronic copies” of these documents. We do not understand the need, utility, basis or rationale behind the making of such a request now.
If you continue to press the request, we invite you to provide detailed reasons as to precisely what is sought together with an explanation as to the entitlement and rationale for needing such access.
In my view, this email had by no means made it clear the fact that the plaintiff was not intending to rely on Grope Hamilton’s “electronic file” in the ongoing costs adjudication. Properly considered, the email can be regard as ambiguous and equivocal in this respect.
Further, the “position” referred to at paragraph 14 of the Rydon affidavit served on 23 December 2019 had certainly not been clearly explained to the defendants in the 6 November 2019 email. It had only been on 23 December 2019, when the defendants received the Rydon affidavit and the plaintiff’s submissions, that the “position” of the plaintiff was made clear.
Further, I note that it was not until the defendants’ receipt of the Rydon affidavit on 23 December 2019 that their solicitors had been informed for the first time that Grope Hamilton had advised Finlaysons, on 19 November 2019, that Grope Hamilton would not be providing Finlaysons with an “electronic copy” of Grope Hamilton’s electronic file. This appears in paragraph 20 of Mr Rydon’s affidavit and exhibit MAR-1.
If this fact had been made clear to the defendants’ solicitors, as well as the fact that the plaintiff was not relying on Grope Hamilton’s electronic file in the costs adjudication, then they would not have issued their interlocutory application in the first place.
Further, as the defendants have submitted, it was entirely appropriate for them to have waited until all documents sourced from Grope Hamilton’s electronic file had in fact been received by Finlaysons before they, the defendants, undertook the onerous role of inspection of the newly obtained documents.
Otherwise, there would have been unnecessary duplication.
I note the email sent by the defendants’ solicitors to the plaintiff’s solicitors of 5 November 2019 when they stated that it was not clear to them whether all recently obtained documents relevant to costs items 5035 to 6009 had in fact been provided by Grope Hamilton to Finlaysons or instead whether there were further documents to come.
This issue had not been addressed in the 6 November 2019 email.
The defendants’ position is that it was only after the receipt of the Rydon affidavit and the plaintiff’s submissions on 23 December 2019 that it became clear to them that all documents recently located by Grope Hamilton were now in the possession of Finlaysons.
It is noted that Mr Dart had inspected those newly obtained documents relating to costs items 5035 to 6009 on 10 January 2020.
It has also been put to the court that the letter from Grope Hamilton to the defendants’ solicitors of 16 December 2019 has shone additional light on the matter. The defendants’ position is that this provides further justification for their having brought the interlocutory application.
The defendants point out that they would never had received the Grope Hamilton letter of 16 December 2019 but for their bringing of the application.
The letter had stated in paragraph 10 that on 3 October 2019 Mr Hamilton had received a letter from Finlaysons indicating, in effect, Finlaysons had been unable to locate some of the documentation on the file. He said that they had said that in addition some items claimed had lacked sufficient details so as to give the taxing Master a proper flavour as to the content of the call. It was put that there were also instances where the handwriting of Mr Hamilton or Ms Karagiannis were hieroglyphic or unable to be easily understood. Mr Hamilton had written in paragraph 11 that Finlaysons had informed him that I had indicated during the adjudication that I would be receptive to a course of action whereby the solicitors involved in the litigation would provide further information or explanation in support of these as-yet unsubstantiated claims. I had accordingly reserved those items which had required further evidence and/or a transcription.
Mr Hamilton said in paragraph 12 of his letter that it was against this background that Finlaysons had provided Grope Hamilton with a list of items where they had been unable to locate any substantiating documentation and/or when a transcription was required and/or where some further explanation was required regarding the substance of a particular attendance. Mr Hamilton said that having received the list, his firm had spent considerable time searching through the records which they could still access and seeking, where possible, to identify an electronically filed copy of an original document. There were a number of items resolved in this manner. Mr Hamilton said that another category was where there was a document on the file but it required elucidation and/or a transcription of hieroglyphic notes. He said that individual aide memoire type file notes had been provided with a stapled copy of the document on the file. He said that this represented Grope Hamilton’s attempts at the solicitor’s explanation contemplated by myself.
Mr Hamilton said at paragraph 13 of the letter that there was no suggestion that the aide memoires were prepared for anything other than in response to my suggestion and Finlaysons’ request. He said at paragraph 14 that by way of a final category, Grope Hamilton had prepared aide memoire type memoranda where there had been a claim made in relation to some attendance but no documentation had been able to be located by Finlaysons on the file. He said that with respect to this category, there might or might not have originally been a document brought into existence evidencing the attendance. If it had ever existed, it had not been located either on the file by Finlaysons or by Grope Hamilton.
Mr Hamilton had intimated at paragraph 17 that the only purpose of the aide memoires was to enable myself to decide whether the item involved was relevant to the prosecution of the action. In Mr Hamilton’s view, I ought to dispense with the need for the plaintiff to produce each and every document or contemporaneous record of each attendance in these circumstances.
The defendants have noted that the various aide memoire referred to in this letter had not been made available to them during Mr Dart’s document inspection at Finlaysons on 10 January 2020. In the letter from the defendants’ solicitors to Finlaysons of 23 January 2020, Mr Dart had indicated that if the plaintiff intended to seek to rely upon any of the aide memoire during the remainder of the costs adjudication, they should provide copies of these. Their position was sought to be confirmed.
Further, they were put on notice that they reserved the defendants’ rights to object to any of the aide memoire being provided to me as part of the ongoing costs adjudication, in the absence of sworn evidence from Mr Hamilton and/or other relevant employees of Grope Hamilton deposing on oath to the matters the subject of the relevant aide memoire.
I accept the defendants’ submission that the matters revealed and explained in this letter had shone a new light on the matter and was relevant to the issue by them of the interlocutory application. The application, although it was not ultimately pursued, has had the practical effect of disgorging further information which will be of relevance and assistance in the adjudication of costs of the plaintiff.
For all of these reasons, I have come to the view that pursuant to r 107(4) it is inappropriate to award costs in favour of the plaintiff incurred by it in consequence of the application, notwithstanding that it was ultimately not pursued. In my view, the appropriate order is that there be no order as to the costs of and incidental to that application.
Conclusion
In these circumstances, I remind myself of the test as to such a matter as set out by the High Court in Re the Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin. As a general rule, a successful party is entitled to costs, but in an appropriate case a court will make an order even where there has been no hearing on the merits, if it is able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action - in which case it will usually mean that the court will make no order as to the cost of the proceedings.
What is significant here, in my view, is that Finlaysons wrote to the defendants’ solicitors on 9 October 2019 stating that they were currently seeking to obtain Grope Hamilton’s electronic file, for the reason to see if it could assist in substantiating any of the remaining items in the plaintiff’s itemised schedule of costs for adjudication.
Subsequently, Finlaysons was advised on 19 November 2019 that the plaintiff was not relying upon Grope Hamilton’s electronic file in the costs application.
Although this notification was received two weeks before the defendants’ solicitors filed their application, no attempt had been made by this date to advise them of Grope Hamilton’s position in this regard.
It was only after the defendants received the letter from Grope Hamilton of 16 December 2019, that they decided to no longer pursue their application. They explained why this was the case in their letter of response dated 23 January 2020.
In my view, the court can conclude in these circumstances that the plaintiff acted so unreasonably that the court should make no order as to the costs of the application (FDN 258) even though it was not ultimately pursued.
Order
1.I order that there be no order as to the costs of the defendants’ application (FDN 258).