Crowe Horwath (Aust) Pty Ltd v Lawson
[2017] VSC 118
•17 March 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
EMPLOYMENT AND INDUSTRIAL LIST
S CI 2016 05156
| CROWE HORWATH (AUST) PTY LTD (ACN 006 466 351) | Plaintiff |
| v | |
| RICHARD LAWSON | Defendant |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 6 March 2017 |
DATE OF RULING: | 17 March 2017 |
CASE MAY BE CITED AS: | Crowe Horwath (Aust) Pty Ltd v Lawson |
MEDIUM NEUTRAL CITATION: | [2017] VSC 118 |
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COSTS – Substantive application for interlocutory injunctive relief resolved by consent – Costs reserved - Application by Plaintiff for costs – Supreme Court (General Civil Procedure) Rules r. 63.02, 63.22 – Sections 7(1), 22- 26 Civil Procedure Act 2010 – Overarching purpose and obligations – MPA Motors Pty Ltd and anor v D&L Schmidt Pty Ltd, Ferny Sky Pty Ltd and ors v Capital Finance Australia considered - Whether Plaintiff acted in accordance with overarching obligations in initiating proceedings - Costs denied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N A T Harrington | Mills Oakley Lawyers |
| For the Defendant | Mr A E Galbraith | Minter Ellison Lawyers |
HER HONOUR:
Introduction
This ruling concerns costs. The proceeding has resolved save for the question of the costs of an interlocutory hearing on 20 December 2016 (‘the interlocutory hearing’) at which orders were made by consent. The plaintiff seeks costs in respect of the interlocutory hearing.
McDonald J made orders in respect of the interlocutory hearing on 20 December 2016, upon the return of a summons filed by the plaintiff on 16 December 2016 (‘the plaintiff’s summons’). In ‘Other Matters’, the orders recorded the following undertakings.
Upon:
1.The plaintiff, by its counsel, undertaking to abide by an order the Court may make as to damages in case the Court shall hereafter be of opinion that the defendant shall have sustained any, by reason of this order, which the plaintiff ought to pay: and
2.The defendant, by his counsel, undertakes that the defendant, until the trial and determination of this proceeding, or if the proceeding is otherwise resolved, or other order, he will not, in the period to midnight on 24 January 2017:
(a) whether by himself, his servants or agents, provide direct or indirect assistance to, or involve himself in, the financial services business of Anthony Loone & Associates (ALA) located at [address], whether as a paid or unpaid agent, advisor, representative, employee, contractor or in any other professional capacity; and
(b) whether directly or indirectly, by himself, his servants or agents, solicit, entice, direct, encourage or procure any person to engage the services of ALA.
The orders provided, by consent, that the plaintiff’s summons be dismissed, thereby liberty to apply, the proceeding be listed for directions on 6 February 2017, and costs be reserved.
Background
In support of its summons, the plaintiff filed an affidavit sworn by one if its directors, Michael Andrew Wilkins, on 16 December 2016 (‘the Wilkins affidavit’). The evidence in the Wilkins affidavit has not been challenged.
The defendant was an employee of the plaintiff from 4 July 1994 until 25 January 2017. The plaintiff and the defendant were parties to an employment agreement and a deed of employee obligations.[1] The defendant was employed by the plaintiff as a principal. The plaintiff is in the business of providing, amongst other things, financial, business and accounting services.
[1]Exhibits ‘MW-2’ and ‘MW-3’ to the Wilkins affidavit.
On 25 July 2016, the defendant gave the plaintiff six months’ notice of his resignation from employment.[2] His letter of resignation referred to his intention to continue to work in public practice in Launceston and the possibility of him joining a previous work colleague, Anthony Loone.
[2]Exhibit ‘MW-4’ to the Wilkins affidavit.
By letter dated 29 July 2016, the plaintiff’s solicitors wrote to the defendant outlining the defendant’s obligations to the plaintiff concerning confidentiality, intellectual property and a restrictive covenant (‘the 29 July letter’).[3]
[3]Exhibit ‘MW-6’ to the Wilkins affidavit.
The 29 July letter stated, amongst other things:
We are certain that you are aware that Crowe Horwath regards your post-employment obligations as of fundamental importance and it will not hesitate to take action against you if it anticipates that you propose to breach any of those obligations or if in fact you do breach any of those obligations.
You are doubtless aware that such proceedings have already been commenced against Mr Anthony Loone.
Such action may include applications for damages and injunctive relief. In the event that injunctive relief is sought, such applications may include applications made on an ex parte basis (that is, without notice to you) for urgent relief and for search orders.
In the event that our client becomes aware of any collusion by you with any other parties to engage in any breach of your obligations, you should anticipate that immediate action of the nature foreshadowed in the preceding paragraph will be taken against you and those other parties.
The 29 July letter directed the defendant not to inform (by any means) any client that he had resigned or was intending to leave the plaintiff’s employment unless he was expressly directed to do so by two representatives of the plaintiff. Further:
You should assume that any breach of this reasonable and lawful direction will be regarded as evidence of intent to breach your post-employment restraints and will lead to the immediate commencement of proceedings against you to compel you to comply with your obligations.
The 29 July letter required the defendant to provide the following undertakings:
I, Richard Lawson of [address] agree and undertake to Crowe Horwath (Aust) Pty Ltd (Crowe Horwath) and to the Supreme Court of Victoria that subject to any subsequent agreement with Crowe Horwath, until 26 January 2018 I will not directly or indirectly, on my own account, jointly with any other person or as an employee or otherwise:
(a)canvass, solicit, or in any way induce or suggest to any person who in the period of 12 months before the end of my employment is or was a client of Crowe Horwath to have services of the nature provided by Crowe Horwath provided by anyone other than Crowe Horwath;
(b)canvass, solicit or in any way induce or suggest to any employee of Crowe Horwath that they should work for anyone other than Crowe Horwath or that they should cease to be employed by Crowe Horwath;
(c)be engaged or involved in any business based within a 5 kilometre radius of the Crowe Horwath Launceston office which competes with, or is the same or similar to the Business of Crowe Horwath.
The 29 July letter stated:
Your email of 25 July 2016 and subsequent discussions and correspondence has created a concern with our client that you are contemplating breaching your obligations in the fashion or similar fashion as that proposed by Mr Loone (or in conjunction with Mr Loone). Accordingly, unless you provide the undertakings by 5pm on Monday 1 August 2016, you should anticipate that our client will immediately commence proceedings against you of a nature similar to those commenced against Mr Loone.
You are on notice that if you do not provide the undertakings requested within the time limited, proceedings will be commenced against you without further notice to you.
On 1 August 2016, the defendant responded to the plaintiff’s letter by way of a letter from his solicitors (‘the 1 August letter’).[4] The defendant refused to provide the undertaking sought in the letter. The 1 August letter stated that such an undertaking had no proper basis.
[4]Exhibit ‘MW-7‘ to the Wilkins affidavit.
On 14 September 2016, the plaintiff directed the defendant to take ‘gardening leave’.
Mr Wilkins deposes that between 19 October 2016 and 24 November 2016 the plaintiff received two anonymous letters referring to the defendant having dealings with Anthony Loone and Associates.[5] Further, that on 8 November 2016, the plaintiff received a letter from Anthony Loone and Associates asking whether there were any professional or ethical reasons it should not accept instructions to perform work for certain persons who were clients of the plaintiff and with whom the defendant had had dealings.[6]
[5]Exhibits ‘MW-8‘ and ‘MW-9‘ to the Wilkins affidavit.
[6]Exhibit ‘MW-11‘ to the Wilkins affidavit.
The plaintiff then engaged a private investigator to undertake surveillance of the offices of Anthony Loone and Associates. The private investigator obtained images of the defendant attending those premises between 28 November and 1 December 2016, and on 6 and 9 December 2016.[7]
[7]Paragraphs 37-44 of the Wilkins affidavit.
The plaintiff’s solicitors wrote to the defendant’s solicitors by way of letter dated 8 December 2016 (‘the 8 December letter’).[8] It stated:
[8]Exhibit ‘MW-15‘ to the Wilkins affidavit.
We refer to our letter to your client of 29 July 2016 and to your letter of 1 August 2016. A copy of each letter is attached.
As you are aware, your client remains an employee of our client Crowe Horwath. Mr Lawson’s employment will terminate on 25 January 2017.
We request that your client confirm by 5.00pm on 9 December 2016 that during the service of his notice period he has complied with all his obligations as an employee of Crowe Horwath, including, without limitation:
(1) the duty to obey lawful and reasonable directions of Crowe Horvath;
(2) the duty of faithful service;
(3) the duty of fidelity;
(4)his duties pursuant to sections 182 and 183 of the Corporations Act 2001 (Cth); and
(5) all of the directions set out in our letter to your client of 29 July 2016.
There was no reply to the letter.
On 16 December 2016, the plaintiff filed a writ with indorsement in this proceeding. It also filed the summons and the Wilkins affidavit, together with a certificate signed by Mr Wilkins certifying that he had read and understood the overarching obligations in sections 16 to 26 of the Civil Procedure Act 2010 (‘the CPA’), and the paramount duty in s 16 of the CPA (‘the overarching obligations certificate’), and a certificate signed by the plaintiff’s solicitor certifying there was a proper factual basis for the writ and summons filed (‘the proper basis certificate’).
It is common ground between the parties that the writ, summons and Wilkins affidavit were served after hours on the defendant’s solicitors, on the evening of Friday 16 December 2016.
On the evening of Monday, 19 December 2016, the defendant’s solicitors wrote to the plaintiff’s solicitors denying their client had breached any obligations and stating that ‘the injunction sought in the said summons is significantly narrower than the restrictions sought to be imposed by the proposed undertaking contained in your letter dated 29 July 2016’ (‘the defendant’s first 19 December letter’). The letter stated:
Without any admissions whatsoever, our client is prepared to give an undertaking in the terms of item 1 of the Summons and noting that such undertaking will operate until the trial of the proceeding or further order of the court or midnight on 24 January 2017, whichever happens first.
We note that the Court will not enforce by injunctive order that which is the subject of a reasonably formulated undertaking.
We maintain that the proffered undertaking is sufficient to resolve the summons and that the question of costs should be reserved, alternatively costs in the cause.
The plaintiff’s solicitors replied on the same evening, requiring that the undertaking be given in Court (‘the plaintiff’s 19 December letter’). The letter also stated:
Providing that your client proffers the undertaking to the Court, our client is content for the question of costs to be reserved or be costs in the cause.
The defendant’s solicitors replied that evening, agreeing to provide the undertaking in Court and reiterating the defendant’s denial of any breach of obligations (‘the defendant’s second 19 December letter’).[9]
[9]These three letters are annexed to the defendant’s written submissions and there was no objection to the Court having regard to them. It is common ground between the parties they were exchanged.
On 20 December 2016, the summons was listed for hearing. The defendant gave an undertaking by his counsel, as agreed. The Court was informed by the defendant’s counsel that the hearing took about six minutes.[10]
[10]This submissions was not challenged by the plaintiff’s counsel. Both counsel were in attendance on the return of the summons on 20 December 2016.
Both parties made oral and written submissions. They need not all be reiterated here. The main submissions by the parties were as follows.
The plaintiff submitted:
(a) costs should follow the event. The plaintiff obtained the relief it sought in its summons. By the defendant proffering an undertaking, the plaintiff achieved success in the interlocutory injunction relief application;
(b) the defendant only offered the undertaking on the steps of the Court;
(c) the defendant’s conduct caused the proceedings generally to be issued but specifically the urgent application for injunction;
(d) the plaintiff sought assurances in its letter of 8 December to avoid litigation but none were given;
(e) the 8 December letter should be read in the context of the 29 July 2016 letter of threatened proceedings;
(f) the undertaking was accepted by the Court on 20 December in all the circumstances. The Court clearly accepted there was a serious issue to be tried on the basis of the Wilkins affidavit, which is unchallenged. There is no affidavit in reply by the defendant; and
(g) had the relevant undertaking been proffered in the days after the 8 December letter, it was highly unlikely the proceeding would have been issued. The plaintiff would not have incurred the costs it now seeks.
In relation to the applicable principles, the plaintiff says that it complied with the CPA and, in particular, with s 22 by sending the 8 December letter.
The plaintiff complied with s 18 of the CPA as the proceeding was issued on a proper basis. It filed the relevant certificates.
In response to the Court’s questions as to whether MPA Motors Pty Ltd and anor v D&L Schmidt Pty Ltd[11] (‘MPA Motors’) or Ferny Sky Pty Ltdand ors v Capital Finance Australia[12] (‘Ferny Sky’) are applicable, the plaintiff’s counsel submitted that they may be distinguished because they concern discontinuance of the proceeding, in comparison to this application which concerns an interlocutory application.
[11][2008] VSC 237.
[12][2006] VSC 366.
Further, in respect of MPA Motors, the plaintiff says that similar to this proceeding, the interlocutory injunction relief effectively resolved the proceeding.
As with the Ferny Sky proceeding, this is a proceeding where there has been capitulation – but in respect of the application, not the entire proceeding. It is relevant to consider that the defendant effectively surrendered on the summons.
The defendant submitted:
(a) had the relevant undertaking been proffered in the days after the 8 December letter, it was highly unlikely the proceeding would have been issued. The plaintiff would not have incurred the costs it now seeks.
(b) at no time prior to the commencement of proceedings was the defendant given an opportunity to give the undertaking sought in the summons or indorsement to the writ. In the circumstances, it is disingenuous to suggest the proceedings would not have been issued if the undertaking had been proffered;
(c) if the plaintiff had proposed the undertaking prior to proceedings, it is highly likely that proceedings would have been avoided;
(d) it is not incumbent on the defendant to frame the undertaking;
(e) that he gave the relevant undertaking on the next business day after being served with the summons and supporting material. He did so with a denial as to the alleged wrongful conduct;
(f) the plaintiff took months to bring proceedings and did so six weeks before the notice period was going to expire and days before Christmas;
(g) the reliance on the letters of 29 July and 8 December is misplaced. The 29 July letter sought undertakings that were different in length and scope to those sought in the summons, which are significantly narrower. The 1 August letter from the defendant’s solicitors said there was no proper basis for such undertakings and it was inappropriate to demand them. The plaintiff’s solicitors did not write again until 8 December and did not seek the undertaking sought in the summons, nor identify the factual basis for the alleged non‑compliance. Contrary to s 23 of the CPA, the 8 December letter did nothing to narrow the issues in dispute;
(h) the 29 July and 8 December letters did not identify with specificity or at all, the purported basis for claiming breaches by the defendant. However, the Wilkins affidavit identifies that information was available to the plaintiff before the 8 December letter was sent. The 29 July and 8 December letters cannot be characterised as letters seeking assurances to avoid litigation;
(i) the 8 December letter did not give any warning that the proceedings would be commenced;
(j) there is little, if any, allegations in the indorsement to the writ or summons premised on the alleged obligations set out in the letters from the plaintiff’s solicitor dated 29 July and 8 December;
(k) the summons, statement of claim, and Wilkins affidavit were not served until after close of business on Friday, 16 December, leaving only one clear business day before the hearing of the summons on Tuesday, 20 December 2016;
(l) on 19 December 2016, the defendant’s solicitors responded, offering the undertaking, and following the response from the plaintiff’s solicitors, requiring it to be offered in court, agreed to do so;
(m) the interlocutory hearing took six minutes;
(n) the appearance of senior counsel at the interlocutory hearing was unnecessary;
(o) the Wilkins affidavit contains no evidence establishing pleaded wrongful conduct; and
(p) the plaintiff’s conduct is manifestly inconsistent with the overarching purpose and ss 22 to 26 of the CPA.
In response to the Court’s questions as to the application of MPA Motors and Ferny Sky, the defendant agrees with the plaintiff’s interpretation of the principles. That is, they are applicable to discontinuance of the proceeding, not an interlocutory application. The defendant’s counsel also notes that both MPA and Ferny Sky were decisions prior to the CPA.
Further, the defendant considers it unfair to apply the principles of MPA Motors to an interlocutory application. In this case, there was no capitulation because there was a denial by the defendant as to the alleged wrongful conduct and the undertaking was given without making any admissions. The undertaking was offered consistently with the CPA to move the matter towards trial. In comparison with MPA Motors, the interlocutory injunction did not resolve the proceeding. There was a later settlement that resolved proceedings. Accordingly, MPA Motors is not applicable.
Applicable principles
Section 24(1) of the Supreme Court Act 1986 (Vic) is applicable:
Costs to be in the discretion of Court
(1)Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
Rules 63.02 and 63.22 of the Supreme Court (General Civil Procedures) Rules 2015 (Vic) (‘the Rules’) are applicable. They provide as follows:
63.02 General powers of Court
The power and discretion of the Court as to costs under section 24 of the Act shall be exercised subject to and in accordance with this Order.
…
63.22 Costs reserved
Where by order of the Court the costs of any interlocutory or other application, or of any step in a proceeding, are reserved, the reserved costs are the parties' costs in the proceeding, unless the Court otherwise orders.
The CPA is also applicable. Section 7(1) provides the overarching purpose:
7 Overarching purpose
(1)The overarching purpose of this Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost effective resolution of the real issues in dispute.
Sections 9 and 16 of the CPA are as follows:
9 Court's powers to further the overarching purpose
(1)In making any order or giving any direction in a civil proceeding, a court shall further the overarching purpose by having regard to the following objects—
(a) the just determination of the civil proceeding;
(b)the public interest in the early settlement of disputes by agreement between parties;
(c) the efficient conduct of the business of the court;
(d) the efficient use of judicial and administrative resources;
(e)minimising any delay between the commencement of a civil proceeding and its listing for trial beyond that reasonably required for any interlocutory steps that are necessary for—
(i)the fair and just determination of the real issues in dispute; and
(ii) the preparation of the case for trial;
(f) the timely determination of the civil proceeding;
(g)dealing with a civil proceeding in a manner proportionate to—
(i)the complexity or importance of the issues in dispute; and
(ii) the amount in dispute.
(2)For the purposes of subsection (1), the court may have regard to the following matters—
(a)the extent to which the parties have complied with the pre-litigation requirements or any other mandatory or voluntary pre-litigation processes;
(b)the extent to which the parties have used reasonable endeavours to resolve the dispute by agreement or to limit the issues in dispute;
(c)the degree of promptness with which the parties have conducted the proceeding, including the degree to which each party has been timely in undertaking interlocutory steps in relation to the proceeding;
(d)the degree to which any lack of promptness by a party in undertaking the proceeding has arisen from circumstances beyond the control of that party;
(e)the degree to which each person to whom the overarching obligations apply has complied with the overarching obligations in relation to the proceeding;
(f)any prejudice that may be suffered by a party as a consequence of any order proposed to be made or direction proposed to be given by the court;
(g)the public importance of the issues in dispute and the desirability of a judicial determination of those issues;
(h)the extent to which the parties have had the benefit of legal advice and representation.
…
16 Paramount duty
Each person to whom the overarching obligations apply has a paramount duty to the court to further the administration of justice in relation to any civil proceeding in which that person is involved, including, but not limited to—
(a) any interlocutory application or interlocutory proceeding;
(b) any appeal from an order or a judgment in a civil proceeding;
(c)any appropriate dispute resolution undertaken in relation to a civil proceeding.
Sections 22 to 26 of the CPA provide:
22Overarching obligation to use reasonable endeavours to resolve dispute
A person to whom the overarching obligations apply must use reasonable endeavours to resolve a dispute by agreement between the persons in dispute, including, if appropriate, by appropriate dispute resolution, unless—
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only judicial determination is appropriate.
Example
A proceeding where a civil penalty is sought may be of such a nature that only judicial determination is appropriate.
23 Overarching obligation to narrow the issues in dispute
If a person to whom the overarching obligations apply cannot resolve a dispute wholly by agreement, the person must use reasonable endeavours to—
(a)resolve by agreement any issues in dispute which can be resolved in that way; and
(b) narrow the scope of the remaining issues in dispute—unless—
(c)it is not in the interests of justice to do so; or
(d) the dispute is of such a nature that only judicial determination is appropriate.
24Overarching obligation to ensure costs are reasonable and proportionate
A person to whom the overarching obligations apply must use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to—
(a) the complexity or importance of the issues in dispute; and
(b) the amount in dispute.
25 Overarching obligation to minimise delay
For the purpose of ensuring the prompt conduct of a civil proceeding, a person to whom the overarching obligations apply must use reasonable endeavours in connection with the civil proceeding to—
(a) act promptly; and
(b) minimise delay.
26 Overarching obligation to disclose existence of documents
(1)Subject to subsection (3), a person to whom the overarching obligations apply must disclose to each party the existence of all documents that are, or have been, in that person's possession, custody or control—
(a) of which the person is aware; and
(b)which the person considers, or ought reasonably consider, are critical to the resolution of the dispute.
(2) Disclosure under subsection (1) must occur at—
(a)the earliest reasonable time after the person becomes aware of the existence of the document; or
(b) such other time as a court may direct.
...
(4) The overarching obligation imposed by this section—
(a)is an ongoing obligation for the duration of the civil proceeding; and
(b)does not limit or affect a party's obligations in relation to discovery.
Sections 41(1) and (2), 42 and 46 of the CPA provide:
41Overarching obligations certification by parties on commencement of civil proceeding
(1)Each party must personally certify that the party has read and understood the overarching obligations and the paramount duty.
(2)The overarching obligations certification must be—
(a)filed with the first substantive document in the civil proceeding filed by the party; and
(b)otherwise in accordance with the rules of court.
…
42Proper Basis Certification
(1)A legal practitioner acting for or on behalf of a party to the proceeding must file a proper basis certification which complies with this section in the following circumstances—
(a)on the filing of a party's first substantive document in a civil proceeding;
...
(1A)In the case of a civil proceeding which involves allegations of fact, a legal practitioner making a proper basis certification must certify that on the factual and legal material available—
(a)each allegation of fact in the document has a proper basis;
(b)each denial in the document has a proper basis;
(c)there is a proper basis for each non-admission in the document.
…
In Ferny Sky, Whelan J considered the authorities in relation to costs where a party wishes to discontinue and outlined relevant principles.
Having considered the authorities and having heard argument, it seems to me that the principles applicable to the case before me are these:
(1)Where neither party desires to proceed with litigation, the court should facilitate the conclusion of the proceeding by making a costs order. In this context it is legitimate to take into account the desirability of encouraging reasonable conduct by parties to litigation which furthers the expeditious and cost-effective resolution of disputes.
(2)In the absence of a trial on the merits it will usually not be appropriate for a court considering the issue of costs to determine the merits or to attempt to assess the likely outcome of a hypothetical trial. But in some cases, a judge may feel confident that one party was almost certain to have succeeded if the matter had been fully tried and, in such circumstances, the judge is justified in determining costs on that basis. In some cases, the discontinuance itself can be seen as an acknowledgement of likely or even certain defeat or as what has been described as a step amounting to "effective surrender." Cases where external events overtake a proceeding or render it futile are in a different category. Such cases are not relevant here.
(3)It is appropriate to consider whether the plaintiff has acted reasonably in commencing or in continuing the proceeding and, in a particular case, the conduct of the defendant might also be relevant.[citations omitted].[13]
[13]Ferny Sky, [25].
In MPA Motors, Hollingworth J considered whether an interlocutory injunction had effectively resolved an application for final relief and applicable costs orders. Her Honour identified the following principles.
Generally speaking, when there has been no hearing on the merits, the court is usually deprived of the factor that determines whether or how it will make a costs order.
However, a costs order may be appropriate where:
(1)One of the parties has acted so unreasonably that the other party should obtain the costs of the action; or
(2)A judge feels confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried.
In Australian Securities Commission v Aust-Home Investments Ltd, Hill J enumerated five principles to guide the exercise of the court's discretion in determining whether to grant costs where a proceeding has been discontinued without final hearing. Those principles have been adopted on numerous occasions.
In particular, his Honour noted that where the proceedings terminate after interlocutory relief has been granted, the court may take into account the fact that interlocutory relief has been granted. However, he noted that fact carries no implication as to the ultimate merits of the case, but does ordinarily suggest that the court granting interlocutory relief has accepted or found that there is an arguable issue to be tried between the parties, and that the balance of convenience favours the grant of relief.
It has been suggested, and I accept, that there may be a gloss on the general principle in a situation where the interlocutory relief granted has effectively resolved the application for final relief.
Clearly, each case must turn on its own facts.[14]
[14]MPA Motors, [17-22].
Consideration
Pursuant to rule 63.22 of the Rules, reserved costs are the parties costs in a proceeding unless the Court otherwise orders. The defendant makes no claim for costs. The question then is whether the plaintiff is entitled to its costs of the application for interlocutory relief.
Each case must be considered on its own facts. The principles enunciated in Ferny Sky and MPA Motors provide a useful guide. Although those principles concern a party discontinuing, they may be considered analogously in terms of the outcome of an application resolved by consent. The interlocutory hearing orders of 20 December 2016 were made by consent. That is, there was no hearing on the merits.
The Court does not accept the plaintiff’s submission that an inference should be drawn from the 20 December 2016 orders that there was a determination by the Court that there was a serious issue to be tried on the basis of the evidence before the Court in the form of the Wilkins affidavit, which was not challenged by the defendant. The matter was dealt with by consent. This finding is reinforced by a reading of the transcript.
The defendant’s first 19 December letter, which offered to provide the undertaking, makes it clear that there was a denial as to the alleged wrongful conduct and the undertaking was being given on that basis. Certainly, the defendant did not provide any affidavit material in reply. However, given that he was offering an undertaking rather than contesting the application, this is not surprising. The Court does not draw any inference from the defendant’s decision not to file an affidavit in reply given that the interlocutory application proceeded as a consent application.
The offering of the undertaking was effectively a capitulation by the defendant to the orders sought in the plaintiff’s summons. It was not a capitulation to the entire proceeding as, firstly, the undertaking was given in the circumstances of the denial of alleged wrongdoing, and secondly, damages were also sought in the indorsement to the writ.
The plaintiff did not request the undertaking in the form of the summons prior to proceedings being issued. The undertakings sought in the 29 July letter were significantly different to those sought in the summons and ultimately given. For instance, the 29 July letter sought an undertaking to be in effect until January 2018 whereas the summons sought the undertaking to be in effect until a year earlier, that is January 2017. They are clearly not alike.
The 29 July letter threatened immediate proceedings if no undertaking was provided. It was an empty threat.
The 8 December letter made no demand for undertakings. Nor did that letter foreshadow proceedings.
The 8 December letter did not provide any factual basis for the assurances sought by the plaintiff despite the Wilkins affidavit evidencing the plaintiff having information available to it at the time which it relied upon as the alleged basis for the non-compliance.
The plaintiff’s submission that it was highly unlikely the proceeding would have been issued if the relevant undertaking had been proffered in the days after 8 December is categorically rejected. The undertaking sought in the summons was never requested by the plaintiff prior to issuing proceedings. As the defendant said, it is not for the defendant to frame the undertaking.
By failing to give notice of the proceeding in the 8 December letter, failing to demand the undertaking demanded by summons until after the proceeding was issued, and failing to provide any factual basis for the relief sought in the summons until the proceedings were issued, the plaintiff acted inconsistently with ss 22, 23 and 24 of the CPA and of the overarching obligations certificate signed by Mr Wilkins in his capacity as company director for the plaintiff on 16 December 2016. Had those matters been addressed, proceedings may well have been averted, thus avoiding the cost of the proceeding. The failure to do so breaches s 24 of the CPA. The failure to address those matters was also inconsistent with the obligation in s 22 of the CPA to use reasonable endeavours to resolve the dispute, and the obligation in s 23 to narrow the issues in dispute.
Given the above, it cannot be said that the plaintiff acted reasonably in issuing the proceedings prior to demanding the undertaking ultimately sought and providing the factual basis for it.
On the other hand, the defendant acted in a timely manner once the proceedings were served on the Friday night. On the evening of the business day after the proceedings were served, he proffered the undertaking. He further agreed to the plaintiff’s demand he do so in Court.
Weighing up all the factors above, the Court does not consider that it is appropriate to order that the defendant pay the plaintiff’s costs of the interlocutory application.
Conclusion
Orders will be made that the costs of the interlocutory application be costs in the proceeding. Given that the proceeding has resolved, subject to any other agreement reached between the parties, this will have the effect that each party will bear their own costs in respect of the interlocutory application.
The parties are requested to confer as to the appropriate form of orders concerning this ruling.
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