Just Group Limited v van Dyk
[2016] VSC 66
•23 February 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2013 5404
| JUST GROUP LIMITED (ACN 096 911 410) | Plaintiff |
| v | |
| JOSEPH VAN DYK | First Defendant |
| - and - | |
| PEPKOR SOUTH EAST ASIA PTY LIMITED (ACN 081 408 791) | Second Defendant |
| - and - | |
| BEST & LESS PTY LTD (ACN 003 724 696) | Third Defendant |
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JUDGE: | SLOSS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 February 2016 |
DATE OF JUDGMENT: | 23 February 2016 |
CASE MAY BE CITED AS: | Just Group Limited v van Dyk & Ors |
MEDIUM NEUTRAL CITATION: | [2016] VSC 66 |
COSTS – Discontinuance of proceeding in circumstances where effluxion of time rendered otiose much of the relief sought – Court’s discretion as to costs – Whether discontinuance was an ‘effective surrender’ – Consideration of parties’ respective obligations under s 24 of the Civil Procedure Act 2010 (Vic) – Each party to bear own costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Dalton | Arnold Bloch Leibler |
| For the Defendants | Mr C O’Grady S.C. with Mr B J Avallone | Herbert Smith Freehills |
HER HONOUR:
Introduction
By summons dated 27 November 2015 the plaintiff, Just Group Limited, seeks leave to discontinue this proceeding pursuant to r 25.02(2)(b) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (the ‘Rules’). It also seeks an order that there be no order as to costs.
The defendants, being respectively Mr Joseph van Dyk (a former employee of the plaintiff), Pepkor South East Asia Pty Ltd (‘Pepkor’) (the parent company of Mr van Dyk’s current employer) and Best & Less Pty Ltd (Mr van Dyk’s current employer) consent to the proceeding being discontinued but on the basis that the plaintiff pays their costs in the proceeding on an indemnity basis or alternatively on a party/party basis.
The plaintiff and the defendants each filed affidavits in support and an outline of written submissions in advance of the hearing. Oral submissions were made yesterday in support of their rival submissions.
The substantive dispute arose as a result of the retail store manager of Just Jeans Mildura, Ms Susanne Albion, moving from her employment with the plaintiff to the position of store manager with the Mildura Best & Less retail store and commencing employment there on 30 September 2013. In essence, the plaintiff contended that Mr van Dyk procured Ms Albion to resign from her employment with the plaintiff and to commence employment with Best & Less, and that in so doing, he misused confidential information. Mr van Dyk had previously been the National Sales Manager of Just Jeans before leaving his employment with the plaintiff to take up a position as Head of Retail Sales at Best & Less in July 2013. The plaintiff also alleged that the second and third defendants were liable as accessories to the alleged breaches of Mr van Dyk.
Background and Procedural History
The background events and the procedural history of the litigation are outlined in the affidavit of Mr Zaven Mardirossian, sworn 27 November 2015, filed on behalf of the plaintiff, and also in the affidavit of Mr Dean Joseph Farrant, affirmed on 18 January 2016, filed on behalf of the defendants.[1]
[1]Mr Farrant's affidavit exhibits affidavits that were produced before the Court in early 2014 on the hearing of the summary dismissal application before Zammit AsJ.
The plaintiff commenced the proceeding on 17 October 2013 against Mr van Dyk and Pepkor seeking injunctive relief and damages.
On 1 November 2013, the defendants' solicitors wrote in some detail to the plaintiff's solicitors to let them know that the defendants believed the proceeding had no real prospect of success and set out the reasons why they held that view. They contended that the plaintiff's pleading of the allegation made against Mr van Dyk demonstrates that the plaintiff has no actual knowledge of the circumstances of Ms Albion leaving her employment. They then proceeded to set out their account of how Ms Albion was recruited.
At paragraph 1.2 of the letter, the defendants' solicitors stated:
The facts are that:
(a)on 12 August 2013, the position of Mildura Best & Less store manager was advertised on SEEK [a website];
(b)Ms Albion saw the advertisement and applied for the position. We note that Ms Albion's application states 'I am writing in response to your advertisement for the position of Store Manager';
(c)The frontline recruitment agency (who Ms Albion was registered with) also notified Best & Less that Ms Albion may be suitable for the position;
(d)The Best & Less Recruitment Manager, Peter Marshall, interviewed applicants and subsequently in conjunction with another Best & Less Manager, made the decision to offer the job to Ms Albion; and
(e)The first defendant had no contact with Ms Albion at all during the recruitment process, and was not involved in the interviews and decision making for the Mildura position.
At paragraph 1.3 of the letter, the defendants’ solicitors dealt with the allegations made against the second defendant, Pepkor, the nub of which appeared to be ‘that [Jason] Murray [who had been CEO of the plaintiff prior to becoming a director of the second and third defendants in 2012] would have been aware of the First Defendant's contractual obligations and knew or was reckless to the fact that the First Defendant would (allegedly) become involved in the unlawful recruitment of retail staff’. The defendants’ solicitors observed that this allegation is ‘with respect, wholly speculative, misconceived and embarrassing.’[2]
[2]Letter, at [1.3].
The defendants also addressed the breadth of the definition of ‘Restricted Activities’ in Mr van Dyk's employment agreement, contending that it ‘is far too broad to be enforceable’.[3] Similarly, they contended that the definition of ‘Confidential Information’, which forms part of the restraint clause, purported to operate more broadly than is reasonably necessary and is clearly unenforceable. Further, the defendants’ solicitors said that the plaintiff's allegation that the second defendant is in competition with the plaintiff is clearly incorrect and is also vague and embarrassing.[4]
[3]Ibid, at [2.1].
[4]Ibid, at [2.3].
The letter of 1 November attached copies of the relevant advertisement that appeared on SEEK, and a covering email from SEEK to Best & Less enclosing Ms Albion's application for the store manager position. Further, after identifying what they contended were the obvious shortcomings in the proceeding, the solicitors for the defendants stated that the plaintiff should agree to consent orders that the proceeding be dismissed with no order as to costs, failing which the defendants would make application for a summary dismissal and seek an order for costs on an indemnity basis. The letter also made several references to the provisions of the Civil Procedure Act 2010 (Vic) (the ‘Civil Procedure Act’) including the obligation under s 24 to use reasonable endeavours to ensure that legal costs are reasonable and proportionate to the complexity or importance of the issues in dispute and the amount in dispute.
By an amended statement of claim filed on 19 December 2013, which added Best & Less as a third defendant, the plaintiff alleged:
(a)in breach of a post-employment restraint, the first defendant (Mr van Dyk) procured Ms Albion to resign from her employment with the plaintiff and to commence employment with the third defendant Best & Less;
(b)the first defendant misused confidential information and therefore breached, amongst other things, an agreed confidentiality obligation and improperly used that information to gain an advantage for himself or the second and third defendants in breach of s 183(1) of the Corporations Act 2001 (Cth);
(c)the second and third defendants were liable as accessories to the alleged breaches. [5]
[5]As summarised by the plaintiff in its written outline of submissions dated 8 February 2016, at [17].
On 31 January 2014, the defendants applied to have the proceeding summarily dismissed. In support of their application they filed affidavits of Mr van Dyk and Ms Albion, in which the circumstances of Ms Albion's recruitment were explained on oath.
The application for summary dismissal of the proceeding was heard by Zammit AsJ (as her Honour then was) on 24 April 2014 and a lengthy decision was delivered on 20 May 2014 refusing the application.[6] Her Honour said that at this early stage of the proceeding she was:
not satisfied that the claim against Mr van Dyk in relation to procuring Ms Albion to resign from Just Group and therefore his breach of the restricted activities has no prospect of success.[7]
She added that in a case of this kind ‘credit is critical and ultimately the defendants’ credit and the plaintiff's witnesses’ credit has not been properly tested.’[8]
[6]Just Group Limited v Van Dyk and Ors [2014] VSC 228.
[7]Ibid, at [26].
[8]Ibid, at [28].
Turning to the ‘Restricted Activities’ clause in the contract, which Mr van Dyk was alleged to have breached, her Honour said the analysis of the clause ‘involves a complex question of law’ and its construction ‘is a matter that should be left to trial.’[9]
[9]Ibid, at [41].
Further her Honour stated:
In order to properly consider the construction of the term “employed person” the Court will have to have regard to the purpose of the Restricted Activities, whether “employer” has a restricted meaning or a more generous meaning, which may include Mr van Dyk assisting or providing information which leads to or contributes to the employment of an individual; and the circumstances surrounding the Deed and when it was entered into will be relevant. For example, matters such as Just Group’s sensitivity to Mr van Dyk resigning; the former staff members of Just Group who have left Just Group and have gone to Pepkor and Best & Less. In my opinion, the context, background or history of the Deed may arguably involve the consideration of Just Group’s commercial need in protecting confidential information and business relationships.[10]
[10]Ibid, at [43.]
Her Honour also rejected the notion advanced by the defendants that the plaintiff's decision to issue the proceeding in the Supreme Court was unsatisfactory because it concerns ‘a minor subject matter’ being a store manager in Mildura moving to employment with Best & Less. Rather, her Honour said:
The claim involves a very senior staff member and allegations about the possible breach of restricted activities, breach of confidential obligations and accessorial liability of the two corporate defendants. These matters can hardly be described as “minor”.[11]
[11]Ibid, at [45].
Her Honour was satisfied that the plaintiff had demonstrated at this interlocutory stage that it had a ‘reasonable prospect’ of success. But she went further and said, given the terms of s 64 of the Civil Procedure Act, even if Just Group's claim has no reasonable prospect of success she considered ‘this to be a dispute of a nature that only a full hearing of the merits is appropriate.’[12] And while her Honour did not consider the matter was one where there should be a summary dismissal, she had serious concerns about the pleading and in particular the allegations relating to misuse of confidential information by Mr van Dyk and the accessorial liability of Pepkor and Best & Less. In these circumstances she proposed making orders that the amended statement of claim be struck out and that Just Group be given leave to file and serve a further amended statement of claim. Her Honour also ordered, by consent, that the costs of the defendants’ application be costs of the substantive proceeding.
[12]Ibid, at [48].
On 30 June 2014, the plaintiff filed a further amended statement of claim. The defendants filed their defence on 14 August 2014. The plaintiff filed a reply on 15 September 2014 and the defendants filed further and better particulars of their defence on 23 September 2014. Meanwhile, on 20 September 2014, the post-employment restraint imposed on Mr van Dyk expired. The plaintiff accepts that from 20 September 2014 no injunctive relief was available to it and that the only relief set out in its pleading it could pursue was by way of damages.[13]
[13]It is noted, for completeness, that at no point did the plaintiff seek any interlocutory relief by way of injunction.
In October 2014 the defendants gave further limited discovery pursuant to a Court order made by Almond J on 5 September 2014. A mediation took place on 22 January 2015 but it did not resolve the matter. In March 2015, ‘critical document’ discovery was given. Further discovery was given by both parties in August 2015 pursuant to a Court order of 5 June 2015. On 7 October 2015 the plaintiff filed four outlines of the evidence of witnesses it proposed to rely upon. And on 11 and 12 November 2015, ten outlines of evidence were filed on behalf of the defendants.
On 27 November 2015, the plaintiff issued its summons, seeking leave to discontinue and that there be no order as to costs. Through Mr Mardirossian, the plaintiff says it wishes to discontinue the proceeding at this point because:
(a) prior to the commencement of the proceedings, a number of managers (including senior managers) left Just Group to work at Best & Less, including Mr van Dyk;
(b) given the timing, context and circumstances around Susanne Albion resigning from Just Group to take up employment with Best & Less, Just Group had reason to believe that:
(i) Mr van Dyk had, with the knowledge and support of Pepkor and Best & Less, procured Ms Albion to leave Just Group and take up employment with Best & Less in breach of his post- employment restraints; and
(ii) if not restrained, the defendants may continue to engage in this unlawful conduct;
(c) although Just Group regards the subject matter of its claims as serious and sees value in what it considers to be a reasonable prospect of vindicating its position by proving liability of the defendants at trial, Mr van Dyk's post-employment restraint, the subject of the proceeding expired in September 2014;
(d) consequently, the injunctive relief is not in prospect, leaving the claim for damages the only potential relief;
(e)the defendants having provided further and full discovery in August 2015 and witness outlines in November 2015, it is apparent that all issues remain in dispute, so the proceeding will involve additional time, effort and expense to run on legal issues such as the proper construction of the restraint clause and factual issues such as the reasonableness of the restraint, the credit of the defendants' witnesses and available inferences. [14]
[14]Affidavit of Mr Mardirossian sworn 27 November 2015 at [16].
Mr Mardirossian says that he is instructed that ‘Just Group will, if required by the Court, provide an undertaking not to re-commence any proceeding against any of the defendants in relation to the subject matter of the proceeding.’[15]
[15]Ibid, at [17].
The Court’s discretion as to costs
Under s 24(1) of the Supreme Court Act 1986 (Vic) the Court has full power to determine by whom and to what extent the costs are to be paid. The Court's discretion as to costs is, as Dawson J explained in Latoudis v Casey, ‘absolute and unfettered and one that is to be exercised judicially, upon facts connected with or leading to the litigation and not by reference to irrelevant or extraneous considerations’.[16]
[16]Latoudis v Casey (1990) 170 CLR 534 at 557.
Furthermore, in their respective judgments in Latoudis v Casey, Mason CJ and Toohey J each pointed out that costs are not awarded by way of punishment, expressly or impliedly, of the unsuccessful party.[17] Rather, as Mason CJ said:
They are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings: Cilli v Abbott (1981) 53 FLR, at p 111.[18]
[17]Ibid, at 543 and 563 respectively.
[18]Ibid, at 543.
The Court’s power and discretion must also be exercised subject to and in accordance with any relevant rules of Court or other legislation. In the present case, the wide discretion conferred on the Court must be exercised in conformity with rr 25.05 and 63.15 of the Rules. Rule 25.05 provides:
Where a proceeding, counterclaim or claim by third party notice is discontinued, or where part of a proceeding, counterclaim or third party notice is withdrawn, liability for costs shall be determined in accordance with Rule 63.15.
Rule 63.15 provides:
Discontinuance or withdrawal
Unless the Court otherwise orders, a party who discontinues or withdraws part of a proceeding, counterclaim or claim by a third party notice shall pay the costs of the party to whom the discontinuance or withdrawal relates to the time of the discontinuance or withdrawal.
The expression, ‘unless the Court otherwise orders’ is not unique to r 63.15 and it appears frequently throughout Order 63 of the Rules.[19] The prevalence with which the expression is used serves to emphasise or confirm the discretionary nature of the decision to be made by the Court by reference to the facts of the particular case.
[19]See rr 63.03, 63.05, 63.08, 63.14, 63.15, 63.16.1, 63.17, 63.18, 63.20, 63.21, 63.22, 63.24(1), 63.24(2), 63.26 and 63.65 of the Rules.
The principles applicable to the issue of costs in circumstances where proceedings are discontinued are conveniently summarised in the recent decision of Derham AsJ in Soteriadis v Nillumbik Shire Council,[20] with due reference to the decision of Hallen AsJ in Johnson and Anor v Clancy and Anor.[21]
[20][2015] VSC 363, at [8]-[13] (‘Soteriadis’).
[21][2010] NSWSC 1301, at [21] (‘Johnson’).
In essence, the cases summarised in Soteriadis and Johnson show that r 63.15 does not give rise to a presumption that costs will be ordered against the discontinuing party. Rather (and paraphrasing what their Honours have said), it creates ‘a starting position’ and the burden is on the party who seeks to persuade the court that a different order should be made to prove the relevant facts. All relevant circumstances, not just the fact of discontinuance, should be considered. If there is to be a departure from the starting position the Court should do so in a particularised and principled way and make such order as it thinks just in the particular circumstances of the case. The reasonableness of the conduct of the parties is also a relevant consideration. That is, whether the plaintiff acted reasonably in commencing the proceeding and whether the defendant acted reasonably in defending it. The reasons for discontinuance can also bear upon the exercise of the discretion as to costs.
In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin,[22] a protection visa was issued by the Minister before the prosecutrix's application for such a visa was heard and so the prosecutrix brought on an application before a single Justice under Order 71 rule 39 of the High Court Rules 1952 (Cth) seeking an order for her costs up to the time the visa was granted. McHugh J held that there should be no order for costs of the proceeding. In stating the principles which govern an application for costs where a party elects not to pursue an action because he or she has achieved the relief sought either by settlement or extra-curial means, McHugh J noted that in cases where there has been no hearing on the merits, ‘a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.’[23] His Honour continued:
In an appropriate case a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the cost of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. …
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. ... But such cases are likely to be rare.
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the costs discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. [24]
[22](1997) 186 CLR 622 (‘Lai Qin’).
[23]Ibid, at 624.
[24]Ibid, at 624-625 (citations omitted).
As the plaintiff has observed in its written outline of submissions, the approach outlined by McHugh J in Lai Qin ‘reflects the desire of the courts to avoid a speculative approach to the assessment of merits and to encourage, within certain limits, the discontinuance (or settlement) of proceedings without sanction.’[25]
[25]Plaintiff’s written outline of submissions dated 8 February 2016, at [6].
In the present case, both parties acknowledge and accept that the Court is not to embark upon a hypothetical trial of the matter. The plaintiff relies on the affidavit material that has been filed to demonstrate what it contends is the reasonableness of its approach, from inception through to the making of the decision to discontinue. The defendants rely on much of the affidavit material to support their claim that costs should be awarded on an indemnity basis, contending that the proceeding should never have been issued, and calling in aid s 24 of the Civil Procedure Act.
In the course of oral argument particular reference was made to two Federal Court decisions. In the first, Australian Securities Commission v Aust-Home Investments Ltd,[26] Hill J decided that he would make no order as to costs as both parties had acted reasonably, there had been no determination on the merits, and neither party wished the proceeding to continue. His Honour observed, at the outset, that the costs of interlocutory proceedings in the Federal Court were dealt with generally in Order 62 rule 3 of the Federal Court Rules 1979 (Cth) but added that the rules, however, ‘lay down no criteria to determine how costs should be awarded.’[27]
[26](1993) 44 FCR 194 (‘Aust-Home Investments’).
[27]Ibid, at 198.
His Honour, after referring to a number of authorities, including the decision of Lord Denning MR in J T Stratford & Son Ltd v Lindley(No.2),[28] said that ‘[w]here neither party desires to proceed with litigation the court should be ready to facilitate the conclusion of the proceedings by making a costs order’.[29] Further, his Honour said:
It would rarely, if ever, be appropriate where there has been no trial on the merits for a court determining how the costs of the proceedings should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial. This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.[30]
Hill J accepted, however, that in determining the question of costs it would be appropriate to determine whether the parties acted reasonably in conducting and defending the proceeding.[31]
[28][1969] 1 WLR 1547.
[29](1993) 44 FCR 194, at 201.
[30]Ibid.
[31]Ibid.
In the second case, One.Tel Ltd v Commissioner of Taxation,[32] Burchett J made an order for costs against a discontinuing party in circumstances where a proceeding ended without a hearing taking place. His Honour, citing Aust-Home Investments and Lai Qin, accepted that where a case terminates before a hearing has taken place ‘the Court should not resolve the issue of costs by engaging in something of the nature of a hypothetical trial.’ [33] But he said ‘this does not mean that the Court can never make an order for costs. ‘[34] Rather, as Burchett J explained:
In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs.[35]
[32](2000) 101 FCR 548 (‘One.Tel’).
[33]Ibid, at 552 [5].
[34]Ibid.
[35]Ibid, at 553 [6].
His Honour pointed out that Lai Qin was a case where the question of whether the Refugee Review Tribunal had or had not erred in law became moot. Turning to Aust-Home Investments, his Honour noted that in that case events had overtaken the proceedings and the relief sought was no longer required, such that the proceedings were terminated without any decision on the merits. He said neither side had won or lost. In the case before him, however, Burchett J said it ‘involves a clear winner’.[36] His Honour said:
By contrast with the decisions I have been discussing the present matter involves a clear winner. The applicants, by their proceeding, sought to challenge the validity of certain notices, and to have them set aside. The respondent, after initially defending those notices, encountered at least an evidentiary difficulty and acknowledged that they were to be set aside. That means that the applicants have succeeded...
… the result one party sought was achieved without a hearing, but not by a "settlement" in the ordinary sense, or as McHugh J used the word, and certainly not by what His Honour called "extra-curial means".[37]
[36]Ibid, at 554 [6].
[37]Ibid, at 554 [7].
The plaintiff’s contentions
The plaintiff contends that the decided cases show that reasonableness of the conduct of the parties is the relevant criterion in circumstances where the Court is not undertaking an assessment or determination on the merits. The plaintiff contends that it was reasonable for it to issue the proceeding when it did in October 2013 and maintain it through the interlocutory stages.
Counsel for the plaintiff said ‘the big issue for the plaintiff at the outset of the proceeding was holding the defendants to account on the restraint’[38] imposed on Mr van Dyk when he left Just Jeans. He was the National Head of Retail Sales of Just Jeans, a very well-known and established brand of the plaintiff. The second defendant, Pepkor, is a South African company operating a large and successful retail business selling fashion clothing and apparel. Pepkor, so counsel said, is a relatively new entrant in the Australian market and the plaintiff viewed the business that Pepkor was running, through Best & Less in Australia, as being in competition with it, not only in relation to clothing and apparel being sold, but also in relation to competition for competent retail store staff.
[38]Transcript 22/02/16, at 1.
The plaintiff points to the decision of Zammit AsJ on the summary dismissal as demonstrating that its proceeding had reasonable prospects of success. Counsel for the plaintiff acknowledged that once the period of the restraint expired on 20 September 2014 there was less to fight over, and in effect all that remained was for the Court to make a finding as to the meaning of the restraint clause and deal with its claim for damages.
The matter was listed for a trial of three to four days’ duration. The plaintiff says it was not unreasonable for it to wish to participate in a mediation with a view to resolving the matter, nor was it unreasonable for it to seek the final tranche of discovery. Indeed, that final tranche of discovery revealed, so the plaintiff contends (and the defendants dispute), further involvement of the first defendant in the recruitment process. Once the witness outlines were filed it was clear to the plaintiff that everything was in dispute and at that point the plaintiff made a decision, having regard to its obligations under s 24 of the Civil Procedure Act, not to persist with a case in this Court where the costs, time and expense of a trial and the proceeding generally may well be out of all proportion to the practical relief in prospect, in particular damages.
Counsel for the plaintiff contended that such a course is not an ‘effective surrender’. Rather, he said, it is ‘a pragmatic realisation of proportionality issues at the right point in time’ and where ‘[e]vents overtook the dispute.’[39]
[39]Transcript 22/02/16, at 25.
The defendants’ contentions
Counsel for the defendants contended that in the present case the structure of r 63.15 makes it clear that in the ordinary course there will be an order for costs in favour of the non-discontinuing party. He referred the Court to Dal Pont, The Law of Costs,[40] and emphasised the policy considerations that inform the starting position that costs should follow the event, pointing out that the policy is reflected by the rules of court applicable in each jurisdiction.
[40]G E Dal Pont, The Law of Costs (LexisNexis Butterworths, 3rd ed, 2013) [14.59] – [14.65].
In The Law of Costs, the learned author continues, however, to acknowledge that the starting position ‘is not inflexible’[41] and that:
the parties’ conduct in the matter and the reasons for the discontinuance, including the circumstances surrounding its commencement and continuance, can bear heavily on the exercise of the costs discretion…
it may prove necessary to distinguish the situation in which a proceeding has been overtaken by a ‘supervening event’, or has become futile, from one in which a proceeding might always have been futile, in the sense of being doomed to fail (a distinction that applies equally in the context of compromises).[42]
[41]Ibid, at [14.63].
[42]Ibid, at [14.64] -[14.65] (citations omitted).
Counsel for the defendants contended that in the present case the Court should follow the approach of Burchett J in One-Tel. He said that the plaintiff, having pursued the defendants for some years had now formed the view that it did not want to proceed with the litigation any more. He said ‘what we have is there has been an effective surrender’[43] and in circumstances where no supervening event has been identified that has rendered the litigation otiose, the starting position under the rules should apply. A costs order should flow from the discontinuance and it is not sufficient for the withdrawing party to simply say that reasonable conduct on its part renders a different outcome.
[43]Transcript 22/02/16, at 35.
The defendants also contended that the findings of Zammit AsJ on the summary dismissal application did not provide a ground of distinction in the present case. They said her Honour had found the matter should proceed to trial, but that it was in a context where, in determining whether there was a real question to be tried, the Court was required to draw all reasonable inferences in favour of the plaintiff. The task before the Court when exercising its discretion as to costs was said to be a different one. The defendants submitted:
The issue currently before the Court is whether, in the light of the decision the Plaintiff has now made to discontinue the proceeding, the ordinary position that a plaintiff should pay the defendant’s costs should be departed from and whether a special order in respect of costs should be made, given the extensive material provided to the Plaintiff at various stages of the proceeding.
In other words, the fact that at an early stage in the proceeding the Associate Judge was not prepared to find that the Plaintiff should be precluded from pursuing its claim if that is what it wished to do, does not mean that having now decided not to pursue the claim, it should be excused from meeting the costs which it forced the Defendants to incur. [44]
[44]Defendants’ outline of submissions dated 16 February 2016, at [63]-[64].
Conclusion
The defendants from the outset of the proceeding, acting responsibly, have been proactive in taking steps directed to demonstrating to the plaintiff that its litigation was misconceived and should never have been commenced. The bringing of an application for summary dismissal of the proceeding was also responsibly directed to that end. But they did not succeed in persuading the plaintiff, or the Court, that the proceeding had no reasonable prospects of success.
The position has now been reached where, with the effluxion of time, the restraint clause in Mr van Dyk’s contract has expired and all that remains is the construction of the clause and the issue of damages. Section 24 of the Civil Procedure Act requires parties to litigation to use reasonable endeavours to ensure that legal costs and other costs incurred in connection with a proceeding are reasonable and proportionate to both the complexity or importance of the issues in dispute, and the amount in dispute.
The decision that the plaintiff has made to seek leave to discontinue the proceeding is demonstrably one made in response to that obligation. The plaintiff has not, in my view, ‘effectively surrendered’.
In the present case, the position is that there has not been any determination on the merits. There is no successful party. Each party has expended considerable sums in pursuing the litigation. Neither party has won or lost. But the course taken by the plaintiff means that each party has been spared the prospect of a three to four day trial, and the attendant costs such an exercise would involve. In my view, if the Court were to accede to the defendants' submission and make an award of costs against the plaintiff, it would be tantamount to punishing the plaintiff for acting responsibly in accordance with its obligations under the Civil Procedure Act. Accordingly, in the exercise of the Court’s discretion, in the circumstances of this case, I do not propose to make any order of the kind sought by the defendants. It follows that no occasion arises to consider the making of an award of costs to the defendants on an indemnity basis.
I will order, by consent, that the plaintiff have leave to discontinue the proceeding. I will also order that each party is to bear their own costs of the proceeding including reserved costs and their costs of this application.
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