Nomad Modular Building Pty Ltd v Smith
[2007] WASC 117 (S)
NOMAD MODULAR BUILDING PTY LTD -v- SMITH [2007] WASC 117 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASC 117 (S) | |
| Case No: | CIV:1361/2007 | 14 15 MAY 2007 & 1 APRIL 2008 | |
| Coram: | MASTER SANDERSON | 16/05/07 | |
| 17/04/08 | |||
| 7 | Judgment Part: | 1 of 1 | |
| Result: | Order for indemnity costs refused Order for third party to be liable for costs of trial refused Unsuccessful party at trial to pay costs of application for third party discovery | ||
| B | |||
| PDF Version |
| Parties: | NOMAD MODULAR BUILDING PTY LTD (ACN 071 271 826) NEVILLE SMITH |
Catchwords: | Costs Application by successful plaintiff for indemnity costs Application to have third party rendered liable for costs Costs of application for third party discovery Turns on own facts |
Legislation: | Nil |
Case References: | Dobb v Hacket (1993) 10 WAR 532 Globaltech Pty Ltd v Pareek [2006] WASC 30 (S) HPM Pty Ltd v Fear [2002] WASCA 249 (S) Shepherd v Baster [2006] WASC 176 (S) |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 17 APRIL 2008 FILE NO/S : CIV 1361 of 2007 BETWEEN : NOMAD MODULAR BUILDING PTY LTD (ACN 071 271 826)
- Plaintiff
AND
NEVILLE SMITH
Defendant
Catchwords:
Costs - Application by successful plaintiff for indemnity costs - Application to have third party rendered liable for costs - Costs of application for third party discovery - Turns on own facts
Legislation:
Nil
(Page 2)
Result:
Order for indemnity costs refused
Order for third party to be liable for costs of trial refused
Unsuccessful party at trial to pay costs of application for third party discovery
Category: B
Representation:
Counsel:
Plaintiff : Mr M D Howard
Defendant : Ms P E Cahill
Non-party : Mr D J Garnsworthy
Solicitors:
Plaintiff : DLA Phillips Fox
Defendant : Jackson McDonald
Non-party : Downings Legal
Case(s) referred to in judgment(s):
Dobb v Hacket (1993) 10 WAR 532
Globaltech Pty Ltd v Pareek [2006] WASC 30 (S)
HPM Pty Ltd v Fear [2002] WASCA 249 (S)
Shepherd v Baster [2006] WASC 176 (S)
(Page 3)
1 MASTER SANDERSON: The outstanding issue between the parties in relation to this matter is the question of costs. Before detailing the issues between the parties, it is necessary to provide some background.
2 The plaintiff issued its writ on 2 April 2007. It sought an injunction restraining the defendant until 1 October 2007 from being employed by, or being engaged in any business activity of, a competing business. By a chamber summons dated 2 April 2007, the plaintiff sought an interlocutory injunction against the defendant. That application was fully argued before Acting Master Chapman on 11 and 13 April 2007. The acting master held that there was a serious question to be tried and that as the balance of convenience favoured the plaintiff, it was entitled to the injunction.
3 Pursuant to orders made by the acting master, the defendant undertook to refrain from taking up employment with Australian Portable Buildings Pty Ltd (APB) until further order. The order provided for programming orders for an expedited trial to be held on 14 and 15 May 2007. The costs of the application were costs in the cause.
4 The case was duly heard on the dates proposed and I made orders granting the injunction sought by the plaintiff. Without revisiting the reasons for decision in detail, it is sufficient if I say that the plaintiff alleged against the defendant breaches of cl 12, cl 13 and cl 14 of the defendant's contract of employment with the plaintiff. A common central element to the plaintiff's allegations concerned cl 12 and cl 13 and was whether, and to what extent, the defendant had been privy to confidential information of the plaintiff during his employment. The defendant alleged, inter alia, that the clauses in question were a restraint of trade and were unenforceable. That allegation was rejected.
5 The defendant appealed the judgment and the Court of Appeal dismissed the appeal. The High Court subsequently refused special leave to appeal from that decision.
6 There appears to have been some disagreement between the parties as to whether there was one cause of action or multiple causes of action. By the time this matter came on for hearing, the defendant had determined the issue should be no longer pressed. Lest there be any doubt on the question, in my view, there was, in substance, only one cause of action - a claim for breach of contract. There is no warrant for what might be called a split costs order which acknowledges that the defendant was successful
(Page 4)
- on certain issues. The fact is the plaintiff succeeded and the defendant failed.
7 On this application three issues arose. First, the plaintiff sought indemnity costs. The orders sought by the plaintiff in its minute of proposed orders dated 17 December 2007 distinguished between the period in the proceedings up to 10 April 2007 and the period thereafter. The plaintiff made its first offer to compromise on 10 April 2007. That offer involved the defendant agreeing to a three-month restraint period from the date of the undertaking. The offer was rejected. In the end, including the first offer, the plaintiff made six offers to the defendant to settle the proceedings. Furthermore, on 30 April 2007, the plaintiff made an O 24A offer. That offer provided for a restraint until 31 July 2007. All of these offers were rejected. At trial, the plaintiff did better than each of the offers made to the defendant by a considerable margin. It was the plaintiff's position that in rejecting the offers, the defendant acted unreasonably.
8 There was no dispute between the parties as to the principles to be applied when what are generally described as Calderbank type offers are made. Reference was made to Dobb v Hacket (1993) 10 WAR 532, 540 (Murray J); Globaltech Pty Ltd v Pareek [2006] WASC 30 (S) and Shepherd v Baster [2006] WASC 176 (S) [34] (Templeman J). In the last of those decisions, Templeman J said that the question for the court on an application for indemnity costs is ultimately:
[W]hether a defendant to whom a Calderbank offer has been made, thereafter acts unreasonably in the proceedings [35].
9 Apart from relying on the fact of the offers themselves, there were two further matters identified by counsel as significant. First, it was said that the length of time in which the offers made by the plaintiff were open was important because they were made in the context of an expedited trial. The fact of expedition meant that costs were incurred above and beyond what was normal. That, it was said, should have focused the mind of the defendant and his advisers and demonstrated that settlement was the only option. Second, it was said that it was significant that Acting Master Chapman had found that there was a serious question to be tried. The fact of that decision was, in counsel's submission, a pointer to the strength of the plaintiff's case and made the defendant's refusal to settle unreasonable. It was submitted, in effect, that the decision of the acting master was ignored at the defendant's peril.
(Page 5)
10 I am not satisfied this is a case where indemnity costs should be awarded. At trial, it was not in issue between the parties that the clauses in question in the employment agreement amounted to a restraint of trade. As a matter of public policy, such restraints are said to be prima facie invalid. It must be remembered here that what the plaintiff was seeking to do was to restrain the defendant from taking up employment which provided his livelihood. Consenting to such a restraint is not a matter to be undertaken lightly. While I would accept that the decision of the acting master was some guide as to the eventual outcome of the trial, what the acting master was called upon to do was to decide whether there was a serious question to be tried. Such a decision can only in the most unusual of circumstances anticipate the final outcome of the trial. Such a decision cannot be seen as equivalent to subjecting a case to the case management technique of early neutral evaluation. The fact that the acting master found an interlocutory injunction should run is significant and it must be taken into account in determining the plaintiff's application. In my view, it is not so persuasive as to ensure that indemnity costs necessarily follow.
11 Nor do I see there being any reason why the fact of an expedited trial should in some way impact upon the basis upon which costs are awarded. The fact is that both parties had to prepare in a hurry. There is nothing to suggest that the defendant did not give the offers put to him serious consideration. In fact, he made a number of counter-offers. The fact that the parties were not able to find common ground is unfortunate. But it shows that negotiations were taking place. It also demonstrates that the defendant did not act so unreasonably as to be visited with an order for indemnity costs.
12 The second issue between the parties was whether APB should be jointly and severally liable for the plaintiff's costs of the proceedings. All parties accepted that the court could make an order for costs against a non-party: see s 37 of the Supreme Court Act 1935 (WA) and O 66 r 1(1). It was also accepted by all parties that the court's power to make an order for costs against a non-party is one which is rarely exercised: see HPM Pty Ltd v Fear [2002] WASCA 249 (S) [4].
13 During the course of cross-examination, the defendant said that he had discussed with APB the prospect of APB paying his costs. He said that although there was nothing in writing, the defendant and APB had an understanding that APB would pay his costs. He also said that he had been told by the managing director of APB, one Neville Katz, that the restraints in his contract were unenforceable.
(Page 6)
14 During the course of his submissions, counsel for APB appeared to suggest that there was no agreement between APB and the defendant that APB would pay the defendant's costs. I reject that submission. The evidence of the defendant in cross-examination on this question was clear. Furthermore, the issue was not revisited in re-examination. Of course nothing that I say should be taken as indicating one way or another whether the agreement is enforceable. But I am satisfied that the defendant believed his costs of this action would be paid by APB.
15 It was the plaintiff's position that the fact of the agreement was a relevant consideration, particularly as the defendant sought to avoid his contractual obligations contained in the employment contract. Furthermore, APB was a direct competitor of the plaintiff. It had poached a senior staff member of the plaintiff and it had advised him that his contract with the plaintiff was unenforceable. In these circumstances, the plaintiff said there should be a costs order to render APB liable to the plaintiff.
16 I am not satisfied this is a case where such an order should be made. There is nothing in the evidence to suggest that APB had some management of the action. They may well have agreed to underwrite the defendant's costs of the action, but that is an altogether different thing from actually managing the action on behalf of the defendant. This is also not a case where APB has caused the action. It was up to the defendant whether or not he accepted employment with APB. He was free to reject their offer. He decided to take it up. That was the decision that precipitated this action. Insofar as there is any causal connection between these proceedings and the actions of APB, it is once removed as a cause of these proceedings. Furthermore, APB does not have a direct financial interest in the outcome of the proceedings. Certainly, had the defendant been successful in defending the action, it would have had earlier access to the defendant's services. But what financial benefit that may have occasioned to APB is speculative. In my view, such benefit as there would have been is too indirect to warrant APB being rendered liable for the plaintiff's costs.
17 The third issue between the parties relates to APB's costs of non-party discovery. There was no dispute that APB was entitled to its costs of giving non-party discovery; the question was whether or not the plaintiff or the defendant ought to have been liable for those costs. I can see no reason why liability for those costs should not rest with the defendant. It was reasonable for the plaintiff to make the application. True it is that the application as originally framed was not pursued in its
(Page 7)
- entirety. But that was more than anything else a decision taken because of the necessity to limit discovery if the trial dates were to be maintained. In the context of the case as a whole, that was a perfectly legitimate forensic decision. Furthermore, the application for discovery was clearly necessary - the plaintiff's solicitors would have been failing in their duty to their client if it had not been made. The application was in no way frivolous and the costs of the application ought be borne by the defendant.
18 I will make orders with respect to costs consistent with these reasons.
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