Oxford Scientific Pty Ltd v Terreiro

[2020] NSWSC 1315

Supreme Court

New South Wales

Medium Neutral Citation:	Oxford Scientific Pty Ltd v Terreiro [2020] NSWSC 1315
Hearing dates:	Written submissions 21 August, 2 and 4 September 2020
Date of orders:	28 September 2020
Decision date:	28 September 2020
Jurisdiction:	Equity - Applications List
Before:	Kunc J
Decision:	Plaintiffs’ costs of the hearings on 27 July and 4 August 2020 to be the plaintiffs’ costs in the cause
Catchwords:	COSTS – interlocutory applications – no issue of principle
Category:	Costs
Parties:	Oxford Scientific Pty Ltd ACN 003759322 Medilink Pty Limited ACN 050540700 Michael (Mike) Erwin Terreiro ANZ-Medical Pty Ltd ACN 152345072
Representation:	Counsel: T Brennan (Plaintiffs) A G Rogers (Defendants) Solicitors: Kennedys (Plaintiffs) McAuley Hawach Lawyers (Defendants)
File Number(s):	2019/00263171
Publication restriction:	No The Court orders: 1. The plaintiffs’ costs of the hearings on 27 July and 4 August 2020 to be the plaintiffs’ costs in the cause.

Judgment

Summary

1. The plaintiffs (“Oxford Scientific”) sue the defendants, being their former employee Mr Michael Terreiro and his related company, for breach of confidence and copyright.

2. In August 2019, Rein J made orders requiring computers and related storage devices of the defendants to be delivered up to an independent expert and forensically copied. The parties were required to agree a regime under which the plaintiffs could review the electronic material that had been copied by the independent expert.

3. The issue which I was ultimately called upon to resolve was the defendants’ claim that, while the documents could be reviewed by Oxford Scientific’s lawyers, a number of those documents should not be shown to Oxford Scientific’s principal, Mr Larry Nowland. The Court ultimately concluded that all but two of the documents (with some having pricing information redacted) could be shown to Mr Nowland.

4. The working out of that process involved several hearings before me. This judgment resolves the only remaining issue in this phase of the dispute, which is who should pay the costs of the final two interlocutory hearings on 27 July and 4 August 2020. In reliance upon a letter inviting the defendants to “reconsider” their resistance to Mr Nowland being shown a number of the documents, Oxford Scientific submit that they should have their costs of those two hearings on the indemnity basis, assessable forthwith. Alternatively, they submit that the costs of those hearings should be their costs in the cause.

5. The defendants submit that the costs should be in the cause or, alternatively, be the plaintiffs’ costs in the cause. The defendants resist any order for the costs to be assessable forthwith.

6. The Court is satisfied that, to the extent it might be relevant, the defendants did “reconsider” their position by reducing the number of documents which they submitted Mr Nowland should not be permitted to see. With two exceptions, they were completely unsuccessful in their attempt to prevent those remaining documents being shown to Mr Nowland.

7. Nevertheless, the Court is satisfied that the defendants’ approach to the matter was not of a kind that would warrant making an indemnity costs order. Nor should the plaintiffs have their costs assessed forthwith in circumstances where their entitlement to any of the documents will turn upon the ultimate outcome of the proceedings. Taking these matters into account, but recognising that Oxford Scientific had almost complete success, the Court has concluded that the plaintiffs’ costs of the hearings on 27 July and 4 August 2020 should be the plaintiffs’ costs in the cause.

8. When the matter came on for hearing before me on 27 July and 4 August 2020, Mr T Brennan of Counsel appeared for Oxford Scientific and Mr A G Rogers of Counsel appeared for the defendants. The parties agreed that the costs of those hearings should be determined on the papers and those same counsel prepared their respective clients’ written submissions.

The facts

9. On 27 August 2019, Rein J made orders for the defendants to deliver up to an independent forensic computer expert various computers and storage devices for forensic copying. The parties were ordered to agree, if they could, upon a regime whereby Oxford Scientific could have access to the material that had been forensically copied.

10. The matter came before me as Duty Judge on 10 December 2019. By that time, the parties had fallen into disagreement over the plaintiffs having access to documents which were referred to as the “Segregated Documents”. The effect of the orders which I made on 10 December 2019 was that Oxford Scientific’s lawyers were to have access to all of the Segregated Documents (other than those subject to a claim of legal professional privilege), but that Mr Nowland could have access from 8 February 2020 to the non-privileged Segregated Documents, except for those which the parties agreed to be “private” to the defendants.

11. By May 2020 the parties were in dispute about 2,375 documents which Oxford Scientific’s solicitors said were “not private” and therefore could be disclosed to Mr Nowland. These came to be referred to as the “Disputed Documents”.

12. The question of Mr Nowland’s entitlement to see the Disputed Documents was listed before me in the Applications List and was heard on 30 June and 1 July 2020. I made it clear to the parties that I did not accept the reasons, such as they were, advanced by the defendants as to why the Disputed Documents should not be disclosed to Mr Nowland. I ordered that the costs of those two days should be Oxford Scientific’s costs in the cause. Oxford Scientific did not seek to disturb that order in their subsequent application which is the subject of these reasons.

13. Nevertheless, based upon some of the submissions put on behalf of the defendants, I accepted that there may have been a relatively small number of the Disputed Documents which the defendants should be given an opportunity to persuade the Court should not be shown to Mr Nowland on specific grounds of commercial confidentiality. To enable that to occur, I made these orders on 1 July 2020 (the “July Orders”) (emphasis added):

“1.   The defendants to advise the plaintiffs’ legal representatives of any document/s listed in:

a.   Electronic Exhibit PF-1 to the Affidavit of Persephone Forster sworn on 23 June 2020 (Forster Affidavit); or

b.   paragraph 57(b) of the Forster Affidavit,

which the defendants wish to withhold from the plaintiffs (with reasons) by 4.00 pm on 8 July 2020 (Withheld Document).

The Court notes that it is anticipated that a small number of Withheld Documents may be identified.

2.   The plaintiffs’ legal representatives to advise of their agreement or otherwise with respect to any Withheld Documents by 4.00 pm on 13 July 2020.

3.   Order 5 of the orders made by the Honourable Justice Kunc on 10 December 2020 be varied insofar as Mr Larry Rex Nowland be granted access from 4.00 pm on 8 July 2020, upon the giving of his undertaking to the Court (in the form appearing at Annexure A), to each of the documents identified in Electronic Exhibit PF-1 and paragraph 57(b) of the Forster Affidavit, with the exception of any Withheld Documents.

4.   The proceedings are listed for further directions in relation to any Withheld Documents at 9.30 am on 15 July 2020 before Kunc J.

5.   Order the plaintiffs’ costs in the cause.

6.   Liberty to any party to restore on short notice by email to Associate to Kunc J in relation to working out of these orders.”

14. In making those orders, I said to the defendants’ counsel, Mr Rogers:

“…this isn’t an invitation to a holus bolus claim. I expect, if there is to be an argument it has to be about documents that you are able to demonstrate pretty clearly are really confidential that otherwise would fall outside [this should read “inside”] what is supposed to be produced. …

So I would hope that the class of documents is going to be very small if not non-existent...” (1 July 2020; T31 25-28, 33-34).

15. Pursuant to the July Orders, by letter of 8 July 2020 the defendants’ solicitors provided a list of 331 documents which they said should not be disclosed to Mr Nowland.

16. By letter dated 14 July 2020, Oxford Scientific’s solicitors complained about the large number of “Withheld Documents” and what they described as the “cryptic generalised reasons” why they should be withheld from Mr Nowland. Particular reference was made to the notation to Order 1 of the July Orders (set out at paragraph [13] above), which Oxford Scientific’s solicitors said also reflected that the Court had only expected a “small number” of documents would be withheld. The letter concluded:

“The 8 July Letter is inconsistent with the spirit of the Kunc Hearing and the July Orders. Accordingly, your clients should urgently reconsider their position by 4pm on 14 July 2020.

Should your clients not reconsider their position, we put you on notice that our clients will seek costs against your clients on an indemnity basis payable forthwith and will rely on this letter and previous correspondence for costs.” (the “14 July Warning”)

17. On 15 July 2020, Mr Terreiro swore an affidavit which explained that of the 331 listed Withheld Documents, many of these were copies, such that there were only really 69 documents in the list and that:

“5.   Of those 69 documents I now only seek to limit access in respect of 49 documents… and only, in most cases, with respect to prices.”

18. Oxford Scientific agreed that the references to prices could be redacted in the 49 documents. Nevertheless, the defendants continued to press their claim in respect of 16 documents set out in Mr Terreiro’s affidavit. The position which the parties had reached was reflected in the orders which I made after the hearing on 27 July 2020:

“Upon Mr Larry Rex Nowland (Mr Nowland) by 5.00 pm on 27 July 2020 giving the undertaking to the Court annexed to these Orders:

1.   Mr Nowland is to have access to each of the documents listed in the tables marked “Redact 1” “Redact 2” and “Redact 3” in exhibit marked “MT-2” (referred to in the affidavit of Michael Terreiro sworn 22 July 2020 (Exhibit MT-2) with redaction of each price contained in any such document.

2.   The plaintiffs are to serve any affidavit dealing with Mr Nowland having access to documents listed in the tables marked “Private 1” and “Private 2” in Exhibit MT-2 by 4.00 pm on 29 July 2020.

3.   The proceeding be listed before Kunc J at 9.30 am on 4 August 2020 for determination of the question of Mr Nowland having access to documents listed in the tables marked “Private 1” and “Private 2” in Exhibit MT-2 and for directions on the question of costs of and associated with the listings before Kunc J from 30 June 2020.

4.   Liberty to apply by 3 days’ notice to the Associate to Kunc J.”

19. At the hearing on 4 August 2020, I determined that Mr Nowland could have access to all of the remaining Withheld Documents, except for two. Of those two, one of those documents had not in fact been separately identified in any correspondence and had only been drawn to attention during the course of submissions by Mr Rogers.

The parties’ submissions

20. Oxford Scientific sought orders that:

“a.   the defendants are to pay the plaintiffs’ costs of and associated with the listings before Kunc J on 27 July 2020 and 4 August 2020;

b.   the costs referred to in paragraph (a) are to be assessed on the indemnity basis and may be assessed forthwith; and

c.   in the alternative those costs are to be the plaintiffs’ costs in the cause.”

21. It is convenient to reproduce Mr Brennan’s written submissions made for Oxford Scientific in full:

“14.   The Defendants have conducted the dispute on document access with the evident purpose of protracting the litigation and forcing the Plaintiffs to incur unnecessary costs. That purpose is to be inferred from the following:

a.   The breadth of the claim to keep 2375 documents away from Mr Nowland thereby forcing the Plaintiffs to exercise their liberty to apply;

b.   The making of the claim to 331 documents on 8 July 2020 in terms which were inconsistent with the terms of the annotation to the Orders of 1 July 2020; and without identifying, at all, pricing as the reason why any of those claims were pressed; nor taking any step to identify that the 331 documents were constituted by 69 discrete documents and copies. A week later claims to 20 of the 69 documents were not pressed and the only claims to a further 33 were for the redaction of prices. The letter of 8 July 2020 – sent more than 3 weeks after the Plaintiffs letter of 15 June 2020 – simply disregarded the basis correctly set out in the 15 June 2020 letter and upon which the Court and the parties were then proceeding. On no view can it have been a genuine attempt to progress the matter. It was a further step to force the Plaintiffs back into Court.

c.   The only claim pressed at the 4 August 2020 hearing of which prior notice had been given was over the contacts list. All other legitimate claims made had been conceded by the Plaintiffs. The Court did not need to hear from the Plaintiffs on the majority of claims. The hearing on 4 August 2020 was, in substance, directed again to delaying the proceedings and drive up costs.

15.   In circumstances in which the Plaintiffs had foreshadowed this application in their letter of 14 July 2020 and the defendants proceeded to force delay and expense in disregard of what was there said and in disregard of the approach firmly articulated by the Court at the hearing on 1 July 2020 it is an appropriate exercise of the costs discretion to provide for assessment on the indemnity basis and for the costs to be payable forthwith.”

22. For his part, Mr Rogers took strong issue with Mr Brennan’s submission that the defendants had acted with “the evident purpose of protracting the litigation and forcing the plaintiffs to incur unnecessary costs”. Mr Rogers submitted that this was a “wholly improper suggestion”. He submitted that there was nothing about the defendants’ conduct which would warrant departing from the ordinary position so as to award costs on the indemnity basis assessable forthwith. He placed emphasis on the fact that, ultimately, the defendants may well demonstrate that they ought never have been in court at all. He submitted that the appropriate order was for Oxford Scientific’s costs to be in the cause or, alternatively, the plaintiffs’ costs in the cause.

Consideration

23. There are four steps in the Court’s reasoning.

24. First, the present application relates only to the hearings on 27 July and 4 August 2020. The Court has already dealt with the costs of the hearing on 30 June and 1 July 2020. The significance of this observation is that the Court should focus on what happened after 1 July 2020. Accordingly, I do not take any account of what Mr Brennan referred to as “[t]he breadth of the claim to keep 2375 documents away from Mr Nowland”. That issue was resolved, including its costs, on 1 July 2020.

25. Second, what occurred after 1 July 2020 was designed to give the defendants a final opportunity to demonstrate specific claims to confidentiality over documents which, absent such a claim being made out, the Court had determined could be produced to Mr Nowland. Insofar as the defendants chose to press such claims, they failed with the exception of two documents. That limited success is, for the purposes of the exercise of the Court’s discretion as to costs, too minimal to alter what would be the usual result of that failure, namely that the defendants should pay Oxford Scientific’s costs.

26. Third, the entire dispute took place in the context of interlocutory orders to which the defendants may ultimately demonstrate Oxford Scientific were never entitled. I accept Mr Rogers’ emphasis on that fact, to which effect is given by the Court’s conclusion that the costs of the two hearings should be the plaintiffs’ costs in the cause. Given that the entitlement to costs is therefore conditional on the substantive outcome of the proceedings, this is not a case where the Court should now order assessment forthwith because the time and effort in doing so may be wasted. It is a matter for the parties if they wish, in the meantime, to attempt to agree those costs.

27. Fourth, it is necessary to consider the effect, if any, of the 14 July Warning. There are three reasons why I do not give it any weight on the question of costs.

28. First, “reconsideration” is a vague or protean expression. In the context of this dispute it is not clear what might or might not have been sufficient “reconsideration”. Importantly, the letter did not invite a total withdrawal of all claims by the defendants. That is consistent with the expectation recorded in the July Orders that the number of documents that might be the subject of any claim would be relatively small.

29. Second, the force of the 14 July Warning was considerably, if not completely, blunted by Mr Terreiro’s affidavit of 15 July 2020. This made clear that the, on its face, large claim over 331 documents was in fact really about 69 documents, and that of those 69 the claim to limited access was pressed only in relation to 49 documents. Given the dispute had started over 2,375 documents, a reduction to 49 documents was, contrary to the assumption which informed the 14 July Warning, within the expectation recorded in the July Orders.

30. Third, and putting the preceding point slightly differently, to the extent a “reconsideration” was called for, the Court is satisfied that occurred. The defendants’ claim was reduced to 69 documents, and of those 69 the claim to limited access was pressed only in relation to 49 documents. After the question of redacting pricing had been resolved, this was further reduced to a claim in respect of 16 documents. At the hearing on 4 August 2020, the defendants substantially failed in relation to that remaining claim.

31. The course of conduct which I have set out in the preceding two paragraphs does not support Oxford Scientific’s submission that the defendants were seeking to delay proceedings and drive up costs. That submission is rejected. The defendants failed in their application, but nothing about their conduct supports the very serious finding sought by Oxford Scientific with the consequential engagement of the Court’s jurisdiction to order indemnity costs.

Conclusion

32. The Court will order that the plaintiffs’ costs of the hearings on 27 July and 4 August 2020 be the plaintiffs’ costs in the cause.

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Decision last updated: 28 September 2020