Luxottica Retail Australia v Grant & Ors (No. 2)

[2009] NSWSC 736

CITATION:	Luxottica Retail Australia v Grant & Ors (No. 2) [2009] NSWSC 736
HEARING DATE(S):	9/3/09 and written submissions
JUDGMENT DATE :	31 July 2009
JURISDICTION:	Equity
JUDGMENT OF:	White J
DECISION:	Order that the plaintiff pay the defendants’ costs of the proceedings from and including 18 February 2009 and that there otherwise be no order as to the costs of the proceedings.
CATCHWORDS:	PROCEDURE - costs - departing from the general rule - whether substantive success in hearing - consideration of reasonableness of settlement offers
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW)
CASES CITED:	Luxottica Retail Australia v Grant & Ors [2009] NSWSC 126 Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 Grant v Brewarrina Shire Council (No. 3) [2003] NSWLEC 108
PARTIES:	Luxottica Retail Australia Pty Ltd v Janet Ruth Grant & Ors (No. 2)
FILE NUMBER(S):	SC 4571/08
COUNSEL:	Plaintiff: M Leeming SC, J Taylor Defendant: D R Sibtain
SOLICITORS:	Plaintiff: Norton White Defendants: Minter Ellison

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Friday, 31 July 2009

4571/08 Luxottica Retail Australia Pty Ltd v Janet Ruth Grant & Ors (No. 2)

JUDGMENT

1 HIS HONOUR: I made orders in these proceedings on 9 March 2009 (Luxottica Retail Australia v Grant & Ors [2009] NSWSC 126). The parties have made written submissions on costs. The plaintiff submits that its costs should be paid by all three defendants up to and including the first day of hearing and there should be no order as to costs for the second day of the hearing. The defendants submit that the plaintiff should pay the costs of all of the defendants of the proceedings on the indemnity basis.

2 By s 98 of the Civil Procedure Act 2005 (NSW), costs are in the discretion of the court. Rule 42.1 of the Uniform Civil Procedure Rules provides that subject to Pt 42, costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. Both parties claim to have had substantial success.

3 Part of the plaintiff’s claims were resolved by orders made by consent and without admissions. That did not resolve the entirety of the proceedings. Where proceedings are compromised without a hearing on the merits and the court is unable to conclude that one party acted unreasonably, either in commencing or defending the proceedings, and where the compromise does not involve a capitulation, it is usually a proper exercise of the costs discretion to make no order as to costs. The court will not usually attempt to determine who would have succeeded had there been no settlement (Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 at 624-25).

4 In the present case the plaintiff’s substantial “success”, apart from nominal damages, arose from the orders made by consent and without admissions for the delivery up of documents. The plaintiff failed on the only substantive issue litigated at the hearing, namely its claim for additional damages for breach of copyright. That claim was advanced only against the first defendant. The plaintiff did not press claims for compensatory damages or equitable compensation for breach of contract, breach of fiduciary duty, or breach of an equitable duty of confidence. It did not press its claim against the second defendant for knowing assistance in an alleged breach of fiduciary duty by the first defendant, nor its claim that the second defendant was liable as a joint tortfeasor for acting in concert with the first defendant pursuant to a common design to infringe the plaintiff’s copyright. It did not maintain a claim for damages or equitable compensation or injunctive relief against either the second or third defendants.

5 The proceedings were commenced on 4 September 2008 by summons naming only Ms Grant as defendant. The second and third defendants were added as defendants on the filing of a statement of claim on 24 September 2008.

6 Orders obtained ex parte on 4 September 2008 were extended by consent until they expired on 29 September 2008. The plaintiff did not seek their extension after that date. On 11 September 2008 the first defendant swore an affidavit in which, amongst other things, she addressed each of the documents referred to in Ms Nichols’ affidavit in support of the summons. Ms Nichols had exhibited a bundle of emails that Ms Grant sent to her home on 27 August 2008. As well as addressing those documents, the first defendant deposed that after checking the documents referred to by Ms Nichols which had been sent to her home Macbook computer, she closed that computer and gave it to her solicitor, Ms Peach of Minter Ellison. Ms Grant volunteered that she had had a second laptop computer which was a predecessor to the Macbook computer, which she also accessed to check to see if it contained any documents relating to her employment with the plaintiff and that she also gave that computer to Ms Peach. She deposed that she gave Ms Peach all documents relating to the plaintiff which she acquired during her employment which she had found up to the date of swearing her affidavit. She deposed that had she continued to work during her four-week notice period she would have returned to the plaintiff any materials which she considered to be confidential or which belonged to the plaintiff prior to the end of the notice period. She also deposed to having a third computer at home which had documents relating to her employment with the plaintiff stored on it. That was a computer which was in current use by her children and by her in ways unrelated to her employment with the plaintiff.

7 The plaintiff says that it was not aware of the scale of its documentation in what it called the “defendants’ possession”, although there was no evidence that documents were in the possession of anyone other than Ms Grant. No adverse inference can be drawn against Ms Grant from her having possession of documents other than those dealt with in my reasons. There was no contested issue in relation to those other documents.

8 On 8 September 2008, an oral proposal was made on behalf of Ms Grant to counsel for the plaintiff to the effect that she was “... prepared to settle this matter on the basis that she undertakes to destroy or delete the documents referred to in the Nichols affidavit and the parties bear their own costs.”

9 That offer was confirmed and extended on 15 September 2008. Minter Ellison, on behalf of Ms Grant, made a without prejudice offer to settle the proceedings on the basis that:

“ 1. Ms Grant will:
(a) return to the Plaintiff or destroy all hard copies (to the extent that they exist) of the documents referred to in Exhibit A to the affidavit of Cheryl Lynnette Nichols sworn on 4 September 2008 and Exhibit A to the affidavit of Cheryl Lynnette Nichols sworn on 12 September 2008 ( Information ) under her possession, custody or control;
(b) where any Information is stored on a hard disk drive of any computer in her possession, custody or control, take steps to ensure that the Information is erased from the hard disk drive of that computer;
(c) destroy (or in the case of electronic documents delete), all documents in her possession, custody or control which contain Confidential Information (within the meaning given to that term in clause 21 of her contract of employment) which came into her possession during the course of her employment with the Plaintiff; and
(d) swear an affidavit confirming that paragraphs (a), (b) and (c) above have been completed.
2. The Plaintiff agrees not to take any steps to enforce the restraints contained in clauses 23.3(a)(v) or (vi) of Ms Grant’s employment contract dated 8 February 2006.
3. Each party will bear its own costs of the Proceedings. ”

10 That offer was not accepted.

11 On 9 September 2008 the plaintiff served a subpoena on Specsavers Pty Ltd. That subpoena was called on on 16 September 2008. On 24 September 2008 the plaintiff filed its statement of claim joining Mr Grant and Specsavers Pty Ltd (“Specsavers”) as additional defendants.

12 On 1 October 2008 Minter Ellison sent an open letter to Norton White (solicitors for the plaintiff) set out at para [15] of my reasons of 9 March 2009.

13 On 7 October 2008 Minter Ellison, writing on behalf of Specsavers, made a proposal to settle the proceedings without admission of liability on behalf of Specsavers on the following basis, namely that:

“ Specsavers will:
(a) return to the Plaintiff or destroy all hard copies (to the extent that they exist) of the documents referred to in Exhibit A to the affidavit of Cheryl Lynnette Nichols sworn on 4 September 2008 and Exhibit A to the affidavit of Cheryl Lynnete Nichols sworn on 12 September 2008 ( Information ) in its possession, custody or control. Please note that to date Specsavers has not been permitted access to the documents contained in those exhibits as your client asserts that they are confidential;
(b) where any Information is stored on a hard disk drive of any computer in its possession, custody or control, take steps to ensure that the Information is erased from the hard disk drive of that computer;
(c) provide an affidavit confirming that paragraphs (a), and (b) above have been completed;
(d) not reproduce, publish or make an adaptation of the Coaching for Conversion Tool Kit; and
(e) pay the Plaintiff’s costs of the Proceedings in so far as they relate to the action against Specsavers on a taxed basis. ”

14 The offer was open for seven days but was not accepted.

15 The plaintiff continued the proceedings against Specsavers because it hoped to obtain evidence that Specsavers had obtained and made use of the plaintiff’s documents. Because Specsavers had objected to producing documents on subpoena, the plaintiff suspected that Specsavers possessed additional documents emanating from it. The defendants said that the objection was taken because the subpoena sought documents which went beyond the scope of the matters in issue. I am not in a position to make any assessment of the reasonableness of the parties’ attitude to the production of documents on subpoena.

16 There was some inconclusive correspondence in October 2008 between the parties’ solicitors as to the inferences to be drawn from the response to the subpoena. The plaintiff made no substantive response to the settlement offers of 15 September 2008 on behalf of Ms Grant and of 7 October 2008 on behalf of Specsavers.

17 On 3 February 2009 Norton White, on behalf of the plaintiff, made an offer to settle the proceedings on the following basis:

“ 1. Subject to order 2 below, the defendants and each of them, by themselves, their servants or their agents refrain from reproducing, disclosing, forwarding, transmitting, altering, deleting, otherwise disposing of any Luxottica non-public information, Confidential Information, Luxottica Confidential Information and Luxottica works (as defined in the Statement of Claim dated 24 September 2008);
2. The defendants and each of them within seven (7) days of making this order deliver up to the plaintiff the original and any copies of any Luxottica non-public information, Confidential Information, Luxottica Confidential Information and Luxottica works (as defined in the Statement of Claim dated 24 September 2008);
3. The defendants and each of them pay the plaintiff’s costs.”

“ Luxottica non-public information ” was an expression used in the statement of claim as referring to information relating to the affairs or business of the plaintiff containing or derived from non-public information about its business or affairs. “ Confidential Information ” meant any confidential information as defined in Ms Grant’s contract of employment (see clause 21.6 quoted at para [16] of my reasons of 9 March 2009.) “ Luxottica Confidential Information ” was defined simply as “ information that was confidential to the plaintiff ”. Presumably this was intended to go beyond “ Confidential Information ” as defined in the contract of employment, but no further definition was attempted. “ Luxottica works ” referred to six documents exhibited to Ms Nichols’ affidavit for which copyright was claimed.

18 The defendants did not respond to this offer. I do not consider the failure to accept the plaintiff’s offer was unreasonable, given the lack of specificity of the expressions “Luxottica non-public Information” and “Luxottica Confidential Information”, and given also that the offer required each of the defendants to pay the plaintiff’s costs. Nonetheless, there was clearly little which separated the parties other than costs. It is regrettable to say the least that no accommodation was arrived at by at least this time.

19 On 16 February 2009 the plaintiff, through Norton White, made a further settlement offer in the following terms:

“ 1. Subject to order 2 below, the Defendants and each of them, by themselves, their servants or their agents, refrain from reproducing, disclosing, forwarding, transmitting, altering, deleting or otherwise disposing of the Plaintiff’s confidential and/or copyright documents as listed in the attached Schedule;
2. The Defendants and each of them within seven (7) days of making this order deliver up to the Plaintiff the original and any copies of the Plaintiff’s confidential and/or copyright documents as listed in the attached Schedule;
3. The Defendants and each of them pay the Plaintiff’s costs. ”

20 There was attached a schedule of documents taken from the verified discovery lists of documents which the plaintiff claimed to be confidential or subject of copyright. The list of documents corresponded substantially, but not exactly, with the list of documents which was the subject of final orders for delivery up on 9 March 2009. The final orders provided for the delivery up of some additional documents but omitted reference to some documents listed in the attachment to Norton White’s letter of 16 February 2009. No submissions were made as to the significance of such variances.

21 By 16 February 2009 the hearing was only one week away. On 17 February 2009 Minter Ellison, on behalf of all of the defendants, made the following further proposal to settle the proceedings:

“ 1. The Defendants will:
(a) return to the Plaintiff all hard copies (to the extent that they exist) of the documents referred to in the attached schedule (which has been extracted from your letter of yesterday) (Information);
(b) where any Information is stored on a hard disk drive of any computer or server in their possession, custody or control, take steps to ensure that the Information is erased from the hard disk drive of that computer or server;
(c) not reproduce, publish or make an adaptation of the Information; and
2. Each party to the proceeding will bear its own costs. ”

22 Norton White responded on 18 February 2009. In substance they agreed to the substantive order proposed on behalf of the defendants, except that they said that the documents referred to in the schedule should be defined not as “Information” but as “Confidential and Copyright Information”. The area of substantive disagreement was on costs. The plaintiffs sought an order that the defendants pay 80 percent of the plaintiff’s costs as agreed or assessed.

23 On the second day of the hearing, the defendants repeated their offer of 17 February 2009 with the additional offer to pay damages of $100, with each party to pay its own costs up to and including 16 February 2009 and for the plaintiff to pay the defendants’ costs from 17 February 2009.

24 Some additional costs were incurred by the plaintiff in establishing its claim to copyright. That claim was not conceded until the trial on the basis that the evidence previously filed was insufficient to establish the claim. In the case of one of the documents, I should have thought that Ms Grant’s own evidence would have demonstrated that the plaintiff had copyright in the document. However, in the light of the defendants’ concession of copyright, that was not a question I have had to decide. In the light of the late service of affidavits by the plaintiff, I do not think that the lateness of the concession by the defendants of the plaintiff’s copyright should affect the exercise of the costs discretion.

25 The plaintiff cannot be regarded as having been successful against Ms Grant because it obtained an award of nominal damages against her and therefore be prima facie entitled to its costs. Alternatively, the fact that only nominal damages were awarded would be good reason for making a contrary order under r 42.1, such that costs not follow the event (Grant v Brewarrina Shire Council (No. 3) [2003] NSWLEC 108 and cases there cited).

26 In the absence of settlement offers and having regard to the parties’ success on the only substantive issues litigated, and having regard to the fact that orders for the delivery up of documents were made by consent and without admissions at the commencement of the hearing, I think the appropriate costs order would be that there be no order as to costs up to 22 February 2009 and that the plaintiff pay the defendants’ costs of the hearing. The reason for such an order would be that the plaintiff obtained orders by consent and without admissions on the first day of the hearing for the delivery up of documents. In the absence of any hearing on its entitlement to those orders, there should be no order as to costs. But the plaintiff substantially failed in respect of the matters that were contested at the hearing; the award of nominal damages for breach of contract not being a substantial success.

27 The settlement offers from the defendants require a modification of this prima facie position. The offers of Ms Grant and Specsavers of 15 September 2008 and 7 October 2008 did not go so far as the final orders that were made. The evidence on the costs application did not disclose whether or not Specsavers had given discovery of the documents in the schedule to the order for delivery up of documents.

28 The offer of 15 September 2008 on behalf of Ms Grant would appear to have dealt with all of the plaintiff’s complaints up to that time, to the extent those complaints were subsequently litigated and found to have substance (other than the claim for nominal damages). The award for nominal damages does not provide a peg on which the plaintiff can make a claim for costs. However, after the production of documents on subpoena and discovery and the amendment of the pleadings, the plaintiff’s claim was substantially widened. No offers were made for the compromise of the widened claim until 17 February 2009. Had the plaintiff accepted the offers of 15 September 2008 and 7 October 2008, it would not have obtained relief to the same extent as that which it ultimately obtained. In my view, the offers of 15 September 2008 and 7 October 2008 do not entitle the defendants to their costs from those dates. What was missing was an offer from the defendants to return to the plaintiff and to erase from the computers the documents which Ms Grant had forwarded to her home computer other than those which were referred to in Exhibit A to the affidavit of Ms Nichols of 4 September 2008 and to Exhibit A to her affidavit of 12 September 2008.

29 However, Minter Ellison’s offer of 17 February 2009 gave the plaintiff substantially the whole of the relief which it obtained in the proceedings. As noted above, no submissions were made as to the significance of the slight variations between the schedule attached to Norton White’s letter of 16 February 2009 and Minter Ellison’s letter of 17 February 2009 and the schedule to the final orders. On the findings I have made, Minter Ellison’s offer of 17 February 2009 should have been accepted. The principal reason for its non-acceptance was the plaintiff’s insistence that it obtain its costs. However, for the reasons I have given, the plaintiff was not entitled to its costs. The rejection of the offer of 17 February 2009 was unreasonable. In those circumstances I consider that all of the defendants are entitled to their costs on the ordinary basis from 17 February 2009.

30 I do not consider that the defendants are entitled to their costs on the indemnity basis. The defendants initially submitted that the plaintiff’s approach to the litigation gave rise to an inference that it was conducted for a collateral purpose of dissuading employees or franchisees from leaving the plaintiff or of dissuading a competitor from engaging with the plaintiff in the market place. If that submission were correct it would warrant an order for indemnity costs. However, I do not understand the defendants to have persisted with that submission and it is unnecessary to decide that question.

31 For these reasons I order that the plaintiff pay the defendants’ costs of the proceedings from and including 18 February 2009 and that there otherwise be no order as to the costs of the proceedings.