SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | The Citadel Group Ltd & anor v Alexander & anor |
Citation: | [2017] ACTSC 308 |
Hearing Date(s): | 14 September 2017 |
DecisionDate: | 20 October 2017 |
Before: | McWilliam AsJ |
Decision: | The plaintiffs to pay the costs of the first and fourth defendant up to and including 5 September 2017, on the ordinary basis. |
Catchwords: | COSTS – discontinuance shortly before hearing – whether proceedings had no reasonable prospect of success or were unreasonably continued – circumstances for indemnity costs not made out |
Legislation Cited: | Court Procedures Act 2004 (ACT) s 5A Court Procedures Rules 2006 (ACT) rr 1163, 1721 |
Cases Cited: | Becker v Queensland Investment Corp (No 2) [2009] ACTSC 147 |
Parties: | The Citadel Group Limited (ACN 127 151 026) (First Plaintiff) Servicepoint Australia Pty Ltd (ACN 081 707 673) (Second Plaintiff) Aaron Alexander (First Defendant) Kevin Keane (Fourth Defendant) |
Representation: | Counsel G McGowan QC (Plaintiffs) C Burgess (Defendants) |
| Solicitors Gadens Lawyers (Plaintiffs) MinterEllison (Defendants) | |
File Number(s): | SC 220 of 2016 |
McWilliam AsJ:
By originating claim filed 25 May 2016, the plaintiffs commenced proceedings against the first and fourth defendants (defendants), among others. The first defendant was formerly employed by the first plaintiff and the fourth defendant was formerly employed by the second plaintiff.
A broad summary of the nature of the case alleged is that since 2013, the plaintiffs had been contracted by a third party to provide to the Commonwealth Department of Defence secure video, telephony and data conferencing and communication services. Prior to the change in commercial arrangements in 2013, the second plaintiff was the sole supplier of secure video conferencing to the Department of Defence for a period of approximately five years.
The defendants had obligations of confidentiality arising from their respective employments with the plaintiffs, which were said to have been breached after their employment with the plaintiffs ended, when they engaged in commercial relationships with a different company, Generation-E Pty Ltd (Generation-E).
The plaintiffs sought declaratory and injunctive relief, and damages or an account of profits, interest and costs.
On 8 September 2017, the…
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CaseChat Overview and Summary
The court had to determine whether the discontinuance of the proceedings, which was made shortly before the final hearing, was justified and whether the proceedings had any reasonable prospect of success. The plaintiffs argued that the proceedings should be discontinued as they had become substantially futile due to changes in circumstances, including the defendants no longer being employed by Generation-E and the possibility of recovering lost business opportunities in the future. The defendants, on the other hand, sought indemnity costs, arguing that the plaintiffs had unreasonably continued the proceedings.
The court found that the circumstances did not warrant indemnity costs for the defendants. The court noted that the discontinuance was made on the basis of an undertaking not to recommence the proceedings with the same allegations. The court further held that the plaintiffs had not demonstrated that the proceedings were without reasonable prospect of success or that they were unreasonably continued. The court observed that the principles for exercising the discretion to award costs in such cases start with the principle that the party who discontinues the proceedings should pay the costs of the other parties. The court also highlighted that the defendants had not established that the plaintiffs had acted unreasonably in continuing the proceedings. Therefore, the court ordered that the plaintiffs pay the defendants' costs up to and including 5 September 2017 on the ordinary basis.
Orders
Orders of the court
The plaintiffs to pay the costs of the first and fourth defendant up to and including 5 September 2017, on the ordinary basis.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
The defendants had obligations of confidentiality arising from their respective employments with the plaintiffs, which were said to have been breached after their employment with the plaintiffs ended, when they engaged in commercial relationships with a different company, Generation-E Pty Ltd (Generation-E). The plaintiffs sought declaratory and injunctive relief, and damages or an account of profits, interest and costs. On 8 September 2017, the plaintiffs filed an application seeking leave to discontinue the proceedings. On 11 September 2017 and by consent, the plaintiffs discontinued the proceedings, which had been listed for final hearing on that day. The discontinuance was on the basis of an undertaking inter-partes not to commence another proceeding making the same or substantially the same allegations as those made in these proceedings. The question of costs remains. The issue was fully argued on 14 September 2017, with written and oral submissions and affidavit evidence regarding a number of letters exchanged between the parties concerning settlement and what are commonly described as Calderbank offers. The plaintiffs’ position is that there should be no order for costs. The first and fourth defendants argue that they should receive the entirety of their costs on an indemnity basis. The power to award costs is in the discretion of the Court: r 1721 of the Court Procedures Rules 2006 (ACT) (Rules). If it becomes unnecessary to continue a proceeding other than for deciding who is to pay the costs of the proceeding, any party to the proceeding may apply to the Court for an order as to costs, and the Court may make the order it considers just: r 1706 of the Rules. Rule 1163 provides: In Re Minister for Immigration & Ethnic Affairs (Cth); Ex Parte Lai Qin (1997) 186 CLR 622 (Lai Qin) at 624-625, McHugh J said (citations omitted, emphasis added): In Rural & General Insurance Broking Pty Ltd v Australian Prudential Regulation Authority [2009] ACTSC 67; 231 FLR 199 (Rural & General), Penfold J surveyed the applicable authorities, including Lai Qin, and summarised the principles to the general exercise of the discretion at [82]. The relevant extract of her Honour’s reasons is as follows: These principles were cited by Mossop AsJ (as his Honour then was) in Redmond v Masterton Canberra Pty Limited [2016] ACTSC 242 at [32]-[33] and by Refshauge J in Construction Occupations Registrar v Minotaur Constructions (ACT) Pty Ltd [2015] ACTSC 275 (Minotaur) at [48] and in Gupta v Australia Capital Territory[2011] ACTSC 39 at [76]-[80]. To this may be added Perisher Blue Pty Limited v Chubb Fire Safety Limited [2014] ACTCA 43 (Perisher Blue) at [41], where the Court of Appeal stated that a starting point for any consideration of the award of costs in the case of a discontinuance is likely to be that the party who discontinues proceedings should pay the costs of the other parties. The plaintiffs essentially rely on Lai Qin. They submit that changes since the proceeding began have the result that the proceeding ‘has become substantially futile’. Those changes include knowledge in November 2016 that the defendants were no longer engaged or employed by Generation-E, that the loss of a business opportunity that was of concern to the plaintiffs may yet become available in the future, and that following the filing of evidence, the completion of discovery processes, including the review of subpoenaed material, the plaintiffs were able to judge that the proper course was to terminate the proceedings.