Actrol Parts Pty Ltd v Coppi

Supreme Court of Victoria|2015-12-23|Before: Bell J

[2015] VSC 758 Revised 5 January 2016

PRACTICE AND PROCEDURE - civil proceeding - claim by employer alleging breach of contract of employment and confidentiality agreement by employee - plaintiff suffered no compensable loss - proceeding continued for nominal damages on point of modest principle - plaintiff's costs around $600,000 and defendant's costs exceeding $300,000 - great disparity of resources between parties - whether plaintiff contravened overarching obligation to ensure reasonable and proportionate costs - whether court has power to dismiss proceeding rather than ordering nominal damages and should exercise it - whether plaintiff unreasonably refused offers of settlement - identifying the successful party where only nominal damages awarded - whether plaintiff should be ordered to pay defendant's costs on indemnity basis - discussion of importance of observance by parties of their overarching obligations and powers of court to make fundamental orders and costs orders by way of sanction when contravention established - Civil Procedure Act 2010 (Vic), ss 28 and , (Vic) , (Vic) O 63.

1 Following an earlier ruling,[1] judgment on the main issues of liability in this proceeding has been delivered.[2] In that judgment, I determined that:

Actrol Parts Pty Ltd had established that it was entitled to direct John Coppi to take leave with pay during the period of his resignation notice
Mr Coppi had established that Actrol had repudiated the contract of employment by directing him to return the motor vehicle (and mobile telephone) that was made available to him for both work-related and private use under the contract during that period
Actrol had established that, for one day, Mr Coppi had breached his contract of employment by commencing employment with another company without informing Actrol until the second day of that employment that he had accepted Actrol's repudiation of his employment by doing so
Actrol had failed to establish that, during the course of his employment, Mr Coppi had breached his contract of employment by sending emails and documents from his Actrol address to his home email address when working from home

2 Having fully discussed the pleadings in the ruling and the judgment, and having determined the main issues of liability in the judgment, I will not here go further into the pleadings or those issues. As the underlying facts, both disputed and as found by me, are dealt with in the judgment (except those relating to the 'factory re-set' issue - see below), neither will I go further into those. In relation to the pleadings, the determination of the main issues of liability and the underlying facts, this judgment should be read with the previous ruling and judgment.

an outstanding issue of fact, being whether Mr Coppi was entitled to cause his company-issued iPhone and iPad to undergo a factory re-set before returning them to Actrol as directed on the day of his resignation
an outstanding issue of law, being whether the court has power under ss 28(1) and 29(1) of the Civil Procedure Act 2010 (Vic) to dismiss a proceeding when a party has contravened its overarching obligations
whether Actrol has breached its overarching obligations in this proceeding
whether an award by way of nominal damages should be made in favour of Actrol in respect of Mr Coppi's one-day breach of the contract of employment or, rather, the proceeding should be dismissed under the Civil Procedure Act
what orders by way of costs should be made in the proceeding, in particular whether:
- as submitted by Actrol, Mr Coppi should pay its costs of the proceeding from and including 8 July 2015 on a standard basis
- as submitted by Mr Coppi, Actrol should pay his costs of the proceeding generally and on an indemnity basis.

5 The general factual setting in which this issue arises has been described in my ruling.[3] It arises in relation to discretionary aspects of the exercise of the court's powers under the Civil Procedure Act and costs.

6 Actrol invites me to find that Mr Coppi breached his contract of employment, his confidentiality agreement and certain policies of the company and otherwise behaved inappropriately in causing his company-issued devices to undergo a factory re-set. This should be taken into account in relation to discretionary issues because, in commencing and prosecuting the proceeding, the company did no more than react to Mr Coppi's breach or improper conduct. By causing the devices to undergo the re-set and engaging in the conduct (among other things), Mr Coppi in effect brought the proceeding upon himself.

7 On the evidence, the factory re-set of the two Apple devices could be carried out by Mr Coppi simply because he was the user and knew what buttons to press in order to bring about this result. Any user with that knowledge could have done so. A factory re-set results in the user's data being deleted from the device, including data by way of messages, photographs and applications. The re-set deletes data stored in the device but not data stored in any server to which it is linked.

8 Although I am about to determine that Mr Coppi did nothing wrong in causing the devices to undergo a factory re-set, Actrol had reasons to be somewhat concerned about this happening. The re-set was carried out by Mr Coppi when he resigned on 13 August 2014 (although the company directed that he return the devices then and there). Actrol had reason to think that he might be taking up employment with Totaline (AHI Carrier (Australia) Pty Ltd), a competitor. Only two weeks earlier, Craig Bicket, a former State Manager for Victoria and other territories, had done so. Viewed in that light, it was natural for Actrol to feel some suspicion (and, in my view, that is all) as to why Mr Coppi had wiped the data from his company-issued devices.

9 The evidence overwhelmingly supports the lawfulness of Mr Coppi's actions. Contrary to Actrol's submissions, no term of his employment or confidentiality agreement prohibited him from re-setting the devices. It was not contrary to any practice or policy of the company of which he was aware. Other departing company employees had acted similarly. Mr Coppi's evidence in this regard easily survived cross-examination and was actually supported by the evidence of two former employees of the company (Mr Bicket and Mr Kanizay), as well as (to a certain extent) one present employee of the company (Mr Laffin). The other evidence given on behalf of Actrol did not establish otherwise. I do not accept the evidence of Mr Nikolic and Mr Di Guilio criticising Mr Coppi's actions. It did not reflect the actual legal position on the subject but their views about how employees should ideally behave having regard to the best interests of the company.

10 Quite apart from being legally entitled to re-set the devices, the evidence established that Mr Coppi did not do so for any improper reason. The devices contained private information, including photographs and messages, and also applications to which Mr Coppi privately subscribed. I accept his evidence that he saw it to be perfectly natural to re-set the devices because he had resigned, had been placed on leave with pay for the duration of his notice period and had been directed then and there to return the devices to the company. It was not his intention to remove company data, such as emails, from the devices as such data was held independently on Actrol's server. It was not established that he removed the data to ensure that inappropriate communications with third parties, such as Totaline, were not discovered.

11 I reject Actrol's submission that Mr Coppi's actions in re-setting the devices helped to bring the proceeding upon himself. Any legitimate concerns that Actrol initially had should have been dispelled by the essentially negative result of the search, inspection and discovery process (see below). It was Actrol who commenced the proceeding and took it to trial on a point of principle and for nominal damages. It did so in its own interests.

Powers of court under Civil Procedure Act

12 This issue arises because Mr Coppi contends, and Actrol disputes, that the court has power to dismiss this proceeding under ss 28(1) and 29(1) of the Civil Procedure Act. I here determine that the court has that power. It is a discretionary power. In the next section of the judgment, I will determine whether to exercise it.

13 Trial judges[4] and the Court of Appeal[5] have emphasised the important objectives of the Civil Procedure Act and the enhanced and new powers conferred upon the court for the achievement of these objectives. In that context, the broad nature of those powers has repeatedly been noted, as has the responsibility of the court to exercise them when called for. Of that responsibility, in Yara Australia Pty Ltd v Oswal,[6] Redlich and Priest JJA, Macaulay AJA stated:

The Act prescribes that parties to a civil proceeding are under a strict, positive duty to ensure that they comply with each of the overarching obligations and the court is obliged to enforce these duties. The statutory sanctions provide a valuable tool for improving case management, reducing waste and delay and enhancing the accessibility and proportionality of civil litigation. Judicial officers must actively hold the parties to account.[7]

14 The provisions in question here are ss 28 (1) and 29(1). Here is s 28 (in full):

Court may take contravention of overarching obligations into account

(1) In exercising any power in relation to a civil proceeding, a court may take into account any contravention of the overarching obligations.

(2) Without limiting subsection (1), in exercising its discretion as to costs, a court may take into account any contravention of the overarching obligations.

29 Court may make certain orders

(1) If a court is satisfied that, on the balance of probabilities, a person has contravened any overarching obligation, the court may make any order it considers appropriate in the interests of justice including, but not limited to ...

This provision then inclusively lists a number of specific powers. Most of these relate to costs. Section 29(1)(e) and (f) are broader. These provide:

(e) an order that the person not be permitted to take specified steps in the civil proceeding;

(f) any other order that the court considers to be in the interests of any person who has been prejudicially affected by the contravention of the overarching obligations.

15 The overarching obligations are specified in ss 16-26 of pt 2.3. These too have been discussed in the authorities. Part 2.3 begins with s 16. It imposes a 'paramount duty' on the court. It is 'to further the administration of justice in relation to any civil proceeding'.

16 Section 18 creates the overarching obligation of having a proper basis for claims. It provides:

18 Overarching obligation - requirement of proper basis

A person to whom the overarching obligations apply must not make any claim or make a response to any claim in a civil proceeding that -

(a) is frivolous; or

(b) is vexatious; or

(c) is an abuse of process; or

(d) does not, on the factual and legal material available to the person at the time of making the claim or responding to the claim, as the case requires, have a proper basis.

Section 24 creates the overarching obligation of ensuring reasonable and proportionate costs, as follows:

Overarching obligation to ensure costs are reasonable and proportionate

A person to whom the overarching obligations apply must use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to -

(a) the complexity or importance of the issues in dispute; and

(b) the amount in dispute.

17 While ss 28(1) and 29(1) authorise making orders that take into account any contravention of the overarching obligations and in the interests of justice respectively, it is also necessary to note that the court is required by s 8 to exercise its powers to give effect to the overarching purpose of the Civil Procedure Act. By s 7, that purpose is 'to facilitate the just, timely and cost-effective resolution of the real issues in dispute'.[8]

18 Actrol submitted that ss 28(1) and 29(1) did not confer power on the court to dismiss a civil proceeding on the ground that a party had contravened an overarching obligation. The exercise of such a power would defeat the common law right of a party to a remedy for breach of contract because it would substitute access to that remedy as of right with access to that remedy at the court's discretion. Having regard to the principle of legality,[9] such an interpretation is not available because the provisions are reasonably capable of other interpretation.

19 In reference to s 28(1), it was submitted that the phrase 'exercising any power in relation to a civil proceeding' was not apt to include a power of dismissal. The provision therefore made contravention of an overarching obligation relevant to the exercise of an existing power of the court. It had no such existing power. Being successful on the breach of contract and duty ground, Actrol had a right at common law to have the court enter judgment in its favour. There was no discretion to refuse to grant judgment by way of nominal damages. Further, extending the court's power to include the power of dismissal was not necessary for the achievement of the law reform objectives of the Civil Procedure Act.

20 These submissions must be rejected. As submitted by Mr Coppi, under ss 28(1) and 29(1) the court can exercise its discretion to dismiss a proceeding after taking into account a contravention of the overarching obligations and the interests of justice respectively.

21 I do not accept that interpreting ss 28(1) and 29(1) so as to authorise making an order of dismissal engages the principle of legality. When these provisions are interpreted so as to apply to or confer a power to make such an order, the right of parties to commence and prosecute a civil proceeding remains, but the 'conduct of [the proceeding] is firmly in the hands of the court'.[10] The right of parties is the right to invoke the jurisdiction of the court through the commencement and prosecution of a proceeding, not a right to have the jurisdiction exercised in a particular way.

22 The words 'any power' in s 28(1) and 'any order' in s 29(1) are very broad. It is hard to think of a more encompassing word than 'any'. There is no warrant for reading it restrictively. This would be inconsistent with the evident purpose of ss 28(1) and 29(1), which is to enhance the powers of the court.[11] Section 8(1) provides insight into the meaning of the word 'any' in reference to the court's powers. There the court's powers include the court's inherent, implied and statutory jurisdiction, that is to say, any of its powers in the sense of all of its powers. That, too, is the meaning of the words 'any power' and 'any order' in ss 28(1) and 29(1).

23 Both ss 28 and 29 serve the purpose of enhancing the powers of the court in relation to civil proceedings, but in different ways. Section 29(1) permits the court to exercise its existing powers after taking into account any contravention of the overarching obligations. Where the court possesses a power to dismiss a proceeding, the power may be exercised after taking this into account. Section 29(1) confers a new power to make 'any order it considers appropriate in the interests of justice' where a person has contravened an overarching obligation. This new power is expressed very broadly and includes, but is not limited to, the power to make orders of the kind specified in s 29(1)(a)-(f). Whether or not the court previously possessed a power to dismiss a proceeding in the circumstances, it includes that power where the court considers this to be appropriate in the interests of justice.

24 In Chan v Chen,[12] Digby J exercised the power in s 29(1) and s 29(1)(f) to strike out a proceeding that had not been properly prosecuted. His Honour did so in order to 'alleviate the ... prejudice to the [defendant], caused by the [p]laintiff's contravention of its obligations under the [Civil Procedure Act], and in particular s 25'.[13] Clearly, his Honour was of the view that it was appropriate in the interests of justice to strike out (which is the equivalent of dismissing) the proceeding. The present case is more an example of excessive than want of prosecution. Nevertheless, correctly in my respectful view, Chan stands for the proposition that the jurisdiction exists under s 29(1) to make a dismissal order when this is in the interests of justice.

25 I accept the emphasis placed by Actrol upon the requirement that the court's powers in ss 28(1) and 29(1) must be exercised judicially. This point was made by French CJ, Kiefel, Bell, Gageler and Keane JJ in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd[14] where their Honours made the following remarks in reference to the Civil Procedure Act 2005 (NSW):

the powers of the court are not at large and are not to be exercised according to a judge's individualistic idea of what is fair in a given circumstance. Rather, the dictates of justice referred to in s 58 require that in determining what directions or orders to make in the conduct of the proceedings, regard is to be had in the first place to how the overriding purpose of the CPA can be furthered, ... The focus is upon facilitating a just, quick and cheap resolution of the real issues in the proceedings, although not at all costs. The terms of the CPA assume that its purpose, to a large extent, will coincide with the dictates of justice.[15]

Clearly, however, there will be occasions where it will be appropriate to exercise the court's existing power to dismiss a proceeding under s 28(1) after taking into account contravention of an overarching obligation and to exercise the court's new power in s 29(1) to do the same thing because the court considers it to be appropriate in the interests of justice to do so.

26 The court possesses an existing power of dismissal upon a number of grounds, most relevantly an inherent power of dismissal on grounds of abuse of process. As was held by Mason CJ, Dawson, Toohey and McHugh JJ in Williams v Spautz,[16] this power 'must extend to the prevention of an abuse of process resulting in oppression, even if the moving party has a prima facie case'.[17] In words that have some relevance for the present case, it was explained by McHugh J in Rogers v The Queen[18] that the inherent power applied to a claim when:

(1) the court's procedures are invoked for an illegitimate purpose; (2) the use of the court's procedures is unjustifiably oppressive to one of the parties; or (3) the use of the court's procedures would bring the administration of justice into disrepute.[19]

Under s 28(1), this existing inherent power of the court to dismiss a proceeding upon grounds of abuse of process may be exercised after taking into account that a contravention of an overarching obligation has occurred.

27 There are no temporal limitations upon the inherent power of the court to dismiss a proceeding upon grounds of abuse of process or upon the exercise of the powers enhanced by s 28(1) or conferred by s 29(1) of the Civil Procedure Act. There appears to be no obstacle in the way of concluding that these powers may be exercised at any stage in the proceeding, including at trial or in the final judgment. In the present case, Mr Coppi calls for exercise of the power at the end of the proceeding by way of dismissal as a final order. That he does so at this late stage in the proceeding seems to me to go to discretion rather than to jurisdiction and I will take it into account in that context.

Whether Actrol breached its overarching obligations

28 Whether Actrol breached its overarching obligations under the Civil Procedure Act arises in relation to discretionary issues, particularly whether the proceeding should be dismissed under ss 28(1) and 29(1) of that Act and the orders that should be made by way of costs. It is convenient to consider this issue before turning directly to those questions.

29 Mr Coppi submitted that Actrol has been guilty of litigation misconduct and breached its overarching obligations under ss 16, 17 and 18 in various respects. In particular, it was submitted that Actrol has made false or unsubstantiated claims of various kinds and also has intimidated a witness (Mr Kanizay). It was submitted that a contempt of court has been committed in relation to that witness.

30 Although these submissions raise serious issues which I have considered, I have come to the conclusion that the discretionary issues in relation to dismissal and costs can be fully and satisfactorily determined by reference to the overarching obligation in s 24 to ensure that costs are reasonable and proportionate. Therefore, I will not be determining whether Actrol engaged in litigation misconduct (as such), committed other contraventions of its overarching obligations or a contempt of court.

31 In determining whether Actrol contravened the overarching obligation in s 24, I will include consideration of whether it was reasonable or unreasonable for the parties to reject the various settlement offers that were made. The rejection of the offers goes to both the alleged contravention of Actrol's overarching obligation and also has implications in relation to the orders that should be made by the court in relation to costs (which will be a subject of later consideration).

32 I will begin by explaining the course of the proceeding.

33 Actrol commenced its proceeding against Mr Coppi by a generally endorsed writ dated 10 September 2014. It claimed damages for breach of the contract of employment and the confidentiality agreement, fiduciary duty and the equitable obligation of confidence, as well as an injunction and costs. Pursuant to a summons, it obtained a search order from Hargrave J on that day. Justice Hargrave found that Actrol had established a 'strong prima facie case'.

34 Pursuant to the search order, the independent computer expert, Gabor Szekeres, took possession of 21 devices at Mr Coppi's home and he was served with the court documents. Mr Coppi then swore an affidavit in the proceeding on 17 September 2014. He denied the allegations made against him. He appeared by senior counsel or counsel at all hearings in the proceedings from this early stage. Mr Nikolic swore an affidavit dated 13 October 2014 disputing aspects of Mr Coppi's affidavit and providing further information and making further allegations.

35 At a settlement conference on 2 October 2014, Actrol offered to settle the proceeding against Mr Coppi on the basis that (among other things) Mr Coppi pay Actrol $150,000 towards its legal costs of approximately $200,000. Mr Coppi's solicitors rejected that offer on his behalf.

36 By a letter dated 9 October 2014, Actrol made a joint offer to settle the proceeding against Mr Coppi and a related proceeding against Mr Bicket. The offer was that the proceedings would be terminated if:

Mr Coppi agreed to a non-solicitation undertaking of 12 months (his contract of employment with Actrol contained no right of restraint of trade clause)
he agreed to keep certain information confidential
he and Mr Bicket paid Actrol the sum of $150,000.

Mr Coppi rejected the offer. Up to this point in time, he had incurred costs of about $23,000. I find that a 'walk-away' offer (one involving the termination of the proceeding with each party bearing their own costs) would have been attractive to him at this stage.

37 There was a court-ordered mediation on 11 May 2015. The proceeding did not settle.

38 Mr Szekeres' independent computer expert report became available on 22 October 2014. A process for inspection of the information retrieved by the parties was thereafter agreed to. The process of inspection did not reveal that Mr Coppi had ever shared confidential company information with a third party, including Totaline.

39 Actrol filed its statement of claim on 16 December 2014. It made essentially the same claims as the general endorsement, including the claim for damages. Mr Coppi's solicitors sought clarification of the claims on 23 December 2014, including the loss and damage. The letter stated:

Related to paragraph 10, in paragraph 18 loss and damage is alleged to have been sustained by the plaintiff by reason of (inter alia) the conduct alleged in paragraph 10. No particulars are provided of any such loss and damage, and for our part we find it difficult to see how any loss may have been sustained by the plaintiff from our client sending emails to his private email address and later deleting them. We seek full and proper particulars of any loss or damage which the plaintiff is alleged to have suffered by reason of the conduct alleged in paragraph 10.

Actrol's solicitors provided some information in reply on 23 January 2015. In relation to loss and damage, the letter stated (among other things):

In relation to paragraph 3:

(a) we confirm that the loss suffered by the plaintiff includes wages paid to the defendant whilst he was working for Totaline;

(b) we also confirm that, as set out in paragraph 18 of the Statement of Claim, the plaintiff may be in a position to quantify these losses with more precision after inspection of the discovered materials. For example, there may be trading losses suffered by the plaintiff as a result of the defendant's breach. If so, further particulars will be provided at that time. In these circumstances, our client considers that the provision of further particulars after discovery is an appropriate course to adopt; and ...

40 On 8 January 2015, Mr Coppi's now employer, Totaline, agreed to loan him $12,500 to assist him in relation to the costs of the Actrol proceeding. There was nothing irregular about this arrangement. The loan was to be, and has been, repaid from his ongoing bonus payments. It reflects Mr Coppi's modest resources, greatly less than Actrol's. There is no evidence that Totaline ever provided any other financial assistance to Mr Coppi and this is denied by him and his solicitors. I find that Mr Coppi is and always has been personally funding the defence of the proceeding and reject Actrol's submissions to the contrary. Mr Coppi and his wife have signed a charge over the family home in respect of the fees owing to their solicitors. If Actrol has persisted with this litigation in the belief that Mr Coppi was not funding his defence personally and that Totaline was the real defendant then it has made a terrible mistake. There is not and never has been any reasonable grounds for this belief.

41 Mr Coppi filed his defence on 9 February 2015 (he amended it on 19 February 2015). In substance, it denied the allegations of breach of contract of employment and duties of employment made against him.

42 Mr Coppi made a request for further and better particulars of the statement of claim on 19 February 2015. Unsurprisingly, the particulars sought included particulars of Actrol's loss and damage. In relation to that subject, the particulars supplied by Actrol on 11 March 2015 stated (among other things) and not very helpfully:

(c) In relation to the loss suffered by the plaintiff, as set out in paragraph 18 of the Statement of Claim:

(i) this loss includes the wages paid to the defendant whilst he was working for Totaline or otherwise betraying his obligations to the plaintiff; and

(ii) the plaintiff may be in a position to quantify its losses with more precision after inspection of the discovered materials. For example, there may be trading losses suffered by the plaintiff as a result of the defendant's breach. If so, further particulars may be provided at that time. In these circumstances, our client considers that the provision of further particulars after discovery is an appropriate course to adopt.

43 On 16 June 2015, Mr Coppi made an offer to settle the proceeding upon the basis that:

the proceeding be dismissed by consent
Actrol pay Mr Coppi the sum of $80,000 towards his legal costs
Mr Coppi provide an undertaking of confidentiality.

The letter containing the offer provided a detailed assessment of Actrol's prospects of success. It pointed out that, by this time, all necessary searches, inspections and discovery have been carried out or completed. It stated that no misuse of confidential information by Mr Coppi had been revealed. It also stated that there was no evidence that Actrol had suffered any loss and damage. These fundamental propositions were established by Mr Coppi at trial. The letter also stated that, up to this time, he had expended about $110,000 on defending the proceeding.

44 Actrol rejected the offer of 16 June 2015 made by Mr Coppi. As to loss and damage, it referred to the intention that it had foreshadowed to seek leave to amend its statement of claim to include a claim for nominal damages. On the subject of loss and damage, the letter of rejection dated 8 July 2015 stated:

(a) First, as set out in the plaintiff's response to the defendant's request for further and better particulars, the plaintiff may be in a position to quantify its loss with more precision after the inspection of the defendant's discovery. This discovery was only provided yesterday afternoon and we are now seeking instructions from our client in respect of it.

(b) Second, whether or not the plaintiff particularises any further loss or damage, the plaintiff's position is that it will be entitled to nominal damages as a result of the defendant's contractual breaches. In particular, we refer to the Employment Agreement and confirm that the plaintiff will consider an award of nominal damages for breach of the Employment Agreement to be a successful outcome. Such a result has precedential value to the plaintiff in demonstrating that the plaintiff is willing to enforce its legal rights. As an aside, the plaintiff notes that it has, under separate cover, provided the defendant with a proposed amended statement of claim dated 7 July 2015, which specifically refers to nominal damages in the prayer for relief.

The letter went on to counter-offer that the proceeding be settled upon the basis that:

the proceeding be dismissed by consent
there be no order as to costs.

45 Mr Coppi rejected the offer on 21 July 2015. In doing so, his solicitors referred to the frequent attempts that had been made to obtain particulars of Actrol's loss and damage. In important remarks, the letter pointed out that a claimant who obtained only an award for nominal damages was not usually considered to be the successful party. This accurately reflected the law. In reference to the obligations of parties under the Civil Procedure Act, it then stated:

The scheme established by the Civil Procedure Act 2010 (Vic) (the Act), and the overarching obligations contained therein, is directed at the efficient resolution of litigious matters before Victorian courts. Section 24 of the Act states that a party must use reasonable endeavours to ensure that legal costs incurred in a proceeding are reasonable and proportionate to (a) the complexity or importance of the issues in dispute, and (b) the amount in dispute. In assessing any claim for legal costs, the court may take into account any breach of the overarching obligations: see ss 28 and 29 of the Act.

46 At about this time, there was an exchange of correspondence between the solicitors for the parties in relation to Actrol's loss and damage. In letters dated 8 July 2015 and 10 July 2015, Mr Coppi's solicitors complained of Actrol's failure to provide the particulars, as they had done previously. The latter letter also opposed the proposed amendment of the statement of claim to include the claim for nominal damages and referred to Actrol's overarching obligations under the Civil Procedure Act, including the obligation in s 24. On 18 August 2015, Mr Coppi's solicitors again made complaint about Actrol's failure to particularise its loss and damage. On 19 August 2015, the issue was raised again. By a letter dated 25 August 2015, Actrol's solicitors advised Mr Coppi's solicitors that the evidence to be given at the trial would not go beyond the allegations in the statement of claim, namely that the damages were constituted by the wages paid to Mr Coppi while working for Totaline during the resignation notice period. Even if the basis of this claim was proved, this was always going to be a small amount of loss.

47 At a hearing before an associate justice on 27 August 2015, Actrol obtained leave to amend its statement of claim. The amendments deleted an allegation of misuse of confidential information, deleted an allegation of wrongful solicitation (constituted by misuse of confidential information), deleted claims based on breach of fiduciary duty and equitable obligations of confidence, deleted a claim for equitable compensation and included the claim for nominal damages.

48 A second 'walk-away' offer to settle the proceeding was made by Actrol on 2 September 2015. It was rejected by Mr Coppi. By this time he had incurred costs of about $149,000 in his defence of the proceeding. The letter of rejection dated 16 September 2015 made a counter-offer of settlement upon the basis that:

the proceeding be dismissed by consent
Actrol pay Mr Coppi the sum of $115,000 towards his legal costs
Mr Coppi give an undertaking of confidentiality.

The letter made more fully developed submissions about the unlikelihood of Actrol obtaining an order for costs if it only obtained an award of nominal damages and also referred to Actrol's obligations under s 24 of the Civil Procedure Act. Up to this time, Mr Coppi had incurred costs in the amount of about $165,000. In this connection, the letter stated:

An offer to walk away close to date of the commencement of litigation may have been an attractive offer to the defendant. In contrast, a walkaway offer in July 2015 (renewed now) entails that the defendant bears responsibility for his own very substantial legal costs in circumstances in which the plaintiff has so belatedly recognised that it has no realistic prospect for success in achieving an award of anything but nominal damages, at best.

Ultimately, the court will have a discretion as to costs. We do not concede that your client will be successful in establishing any entitlement to nominal damages. If we are wrong, we still do not think an award for nominal damages makes the plaintiff the substantially successful party.

The plaintiff is a large commercial enterprise. For a year, it has prosecuted a money claim. It has a statutory obligation to ensure costs are reasonable proportion to the amount in dispute. If the court finds, as appears inevitable, it has suffered no loss, our submission to the court will be that it has failed in its case. The newfound prominence accorded to a claim for nominal damages represents the plaintiff's recognition of the inevitability of the failure of its action for actual damages. The plaintiff ought not to be able to visit the legal costs of its failure upon the defendant by a stratagem of pointing to a walkaway offer only made at a point in time in the litigation when the defendant had unavoidably incurred costs of $110,000.00.

49 On 20 November 2015, by which time the proceeding had been set down for trial on 25 November 2015, Actrol made a third 'walk-away' offer. As it had previously, it contended in the letter of offer that an award of nominal damages for breach of either the contract of employment or the confidentiality agreement would be a successful outcome for the purposes of costs. In this connection, Actrol's solicitors contended that:

While the FASOC includes a claim for loss and damage arising as a consequence of the defendant's breach of those instruments, we again reiterate that the plaintiff considers that an award of nominal damages for breach of either of the Confidentiality Agreement or the Employment Agreement to be a successful outcome. Such a result has significant value to the plaintiff in demonstrating that the plaintiff is prepared to enforce its legal rights, which has been the plaintiff's key motivation in issuing these proceedings.

50 By this time, Mr Coppi had incurred costs of $230,000 in defending the proceeding. He rejected the offer. In a counter-offer on 20 November 2015, he again pointed to the lack of any evidence of him engaging in wrongdoing and of Actrol suffering any loss and damage. He offered to settle the proceeding upon the basis that:

Mr Coppi pay Actrol nominal damages in the amount of $20
the proceeding be dismissed by consent
Actrol pay Mr Coppi the sum of $185,000 towards his legal costs
Mr Coppi give a confidentiality undertaking.

51 Mr Coppi made a further counter-offer on 26 November 2015, this time reducing the contribution towards his legal costs that Actrol would pay from $185,000 to $150,000. This was the second day of the trial. I infer that the offer reflected comments made by me on the first day of the trial about the desirability of the proceeding settling. The letter of offer stated (among other things):

Your client has not pleaded or demonstrated with any documents that it has suffered any actual loss or damage. Your client now is limiting its case to seeking nominal damages. We consider that occupying the valuable time of the Supreme Court of Victoria for four days (perhaps longer) on the question of nominal damages is a waste of the parties' and the State's resources. This view is fortified by the objects and provisions of the Civil Procedure Act 2010 (Vic) that we have previously referred to. We have already, in previous correspondence, adverted to the consequences which will arise under the Civil Procedure Act in respect of this claim.

In our view this action has been commenced and continued by your client in defiance of the known facts and without any proper basis, in fact or law. The baseless suspicions which evidently actuated the bringing of this proceeding by your client have no support in the evidence, oral or written, filed on either side. In bringing this proceeding your client allowed itself a luxury, and engaged in a high-handed presumption (see Australian Guarantee Corporation Ltd v De Jager [1984] VicRp 40; [1984] VR 483 per Tadgell J). We will seek an order that the costs of this entire proceeding be paid by your client on an indemnity basis, accordingly.

Up until this time, Mr Coppi had incurred legal costs of about $282,000.

52 Actrol rejected this offer. On 27 November 2015 (the third day of the trial), it counter-offered to settle the proceeding upon the basis that:

the proceeding be dismissed by consent
Actrol pay Mr Coppi the sum of $30,000 towards his legal costs
Mr Coppi give a confidentiality undertaking.

Mr Coppi rejected this offer. By this time, his legal costs had risen to about $294,000.

53 The trial of the proceeding was conducted before me between 25 November 2015 and 3 December 2015, a duration of 7 days. After I delivered judgment in relation to liability on 9 December 2015, there was a 2 day hearing in relation to relief and costs (the hearings were a half-day in duration).

54 I have been informed by senior counsel for Actrol that its legal costs are in the vicinity of $600,000. I have been informed by senior counsel for Mr Coppi that his legal costs exceed $300,000.

55 Against that factual background, I can turn to whether Actrol breached the overarching obligation, beginning with an analysis of its content.

Overarching obligation to ensure reasonable and proportionate costs

56 The overarching obligation in s 24 of the Civil Procedure Act to ensure costs are reasonable and proportionate applies to parties (and legal practitioners, among others) in civil proceedings.[20] Subject only to the paramount duty in s 16 to further the administration of justice, it prevails over any legal, contractual or other obligations to the extent of any inconsistency.[21] It was not submitted on behalf of Actrol that there was any such legal, contractual or other duty.

57 Section 24 prescribes a positive and continuing obligation to use reasonable endeavours to ensure that legal and other costs in connection with civil proceedings are reasonable and proportionate to the complexity and importance of the issues and the amount in dispute. This particular overarching obligation is highly important because it is centrally related to the overarching purpose of the Civil Procedure Act as specified in s 7(1), being 'the just, efficient, timely and cost-effective resolution of the real issues in dispute'. In Yara,[22] Redlich and Priest JJA and Macaulay AJA referred to a passage in the second-reading speech relating to the Civil Procedure Act in which the Attorney-General made a connection between this overarching obligation and the need for legal culture to change. The Attorney-General stated:

At the core of these reforms is the concept of proportionality. Participants in litigation will be required to use reasonable endeavours to ensure that legal and other costs spent in the proceeding are reasonable and proportionate to the complexity or importance of the issues in dispute, and the amount in dispute. The courts will also be required to deal with a civil proceeding in the same manner.

These provisions are designed to cure unnecessary expenditure on litigation and the inappropriate use of the courts as a public resource, a matter that has been highlighted in several recent decisions.

I note recent judicial statements criticising the costs charged by some lawyers as being disproportionately high in comparison to the amounts in dispute, as well as urging lawyers to focus on resolving disputes, rather than attempting to win at all costs. Under the civil procedure reforms, these kinds of behaviours will need to change.

When the courts are used by litigants and lawyers in this way, the public loses faith in the justice system and the courts are unavailable to hear meritorious claims. This package of reforms will require all participants in the civil justice system to lift the standards of conduct in civil litigation and to work together to achieve a positive change in the civil justice system.[23]

58 The elements of the overarching obligation in s 24 are that parties (and others obliged) are required:

to use 'reasonable endeavours'
to ensure that costs are 'reasonable and proportionate', that is, to the 'complexity or importance' of the issues and 'the amount' in dispute.

It can be inferred from the content of these elements that the purpose of the obligation is not to place unrealistic burdens of responsibility upon participants in civil litigation but, in the interests of the administration of justice, to ensure that a reasonable and proportionate relationship is maintained between legal and other costs incurred in a proceeding and the nature of the issues and the amount in dispute.

59 Speaking of this overarching obligation, in Yara Redlich and Priest JJA and Macaulay AJA said:

Section 24 adopts a flexible test. There is plainly no costs matrix or formula that can be applied in determining whether the parties have met their obligations. Rather, the court must weigh the legal costs expended against the complexity and importance of the issues and the amount in dispute, in order to determine whether the parties used reasonable endeavours to ensure those costs were proportionate.[24]

As can be seen from this statement, the obligation to use reasonable endeavours to ensure costs are reasonable and proportionate invokes an objective standard of general application which applies in the specific facts and circumstances of a particular civil proceeding. While the obligation falls upon the parties (and others obliged), it is ultimately for the court objectively to determine whether it has been observed.[25]

60 Based as it is on the concept of proportionality, the obligation demands a balanced consideration of ends and means. It strongly discourages conducting litigation by reference to the old principle that the ends justifies the means. This kind of litigation too often meant that economically powerful parties could, to achieve even modest ends, spend virtually what they liked on legal costs, with potentially deleterious consequences for the conduct of the proceeding by all of the parties, as well as the administration of justice. The new principle aims to ensure that there is a reasonably proportionate relationship between ends and means.

61 The obligation to ensure that costs are reasonable and proportionate is not cast in definite and absolute terms. That would have ignored the dynamic and multifarious nature of civil proceedings and imposed a potentially unfair burden upon persons obliged. It is cast in terms of requiring parties (and others obliged) to use their 'reasonable endeavours' to ensure that costs are reasonable and proportionate. The obligation is flexible with respect to what is required by way of reasonable endeavours, as it is with respect to what reasonably proportionate costs might be. It is nonetheless a demanding obligation that has to be taken seriously, especially because it applies positively and continuously during the whole course of the proceeding. While there is plenty of scope for the sensible conduct of a proceeding by parties (and others obliged) who are mindful of their obligations, the Civil Procedure Act sets its face against those who are blind to those obligations or, worse, would seek to exploit their position of relative power. Orders by way of sanction may be made under pt 2.4.

62 That being the nature of the obligation, the question now is whether Actrol contravened it.

Did Actrol contravene the overarching obligation?

63 Contrary to Actrol's submissions, I find that it did breach the overarching obligation in s 24 of the Civil Procedure Act to take reasonable endeavours to ensure that costs are reasonable and proportionate. There were reasonable steps that it could and should have taken towards that end, such as making a reasonable offer to settle the proceeding once it was appreciated that it could not establish that Mr Coppi had passed company information on to third parties and, if that failed, submitting the issue of the disposition of the proceeding to the court in the light of those facts. It did neither.

64 In reaching this conclusion, I take into account that Actrol has established that it had an implied power to direct Mr Coppi to take paid leave during his period of resignation notice and, unless the proceeding is dismissed, would have an entitlement (as of right) to an award for nominal damages. But I make clear that I would have been of the same view even if Actrol had won every issue of liability that it raised. By trial, it was not alleging misuse of confidential information consisting of communication to third parties or that it had suffered actual compensable loss and damage. It was pursuing its case to final judgment for nominal damages on principle. In doing so, it deliberately expended amounts by way of legal and other costs that were not reasonably proportionate to that modest end. This would have been so even if it had won every issue of liability. That it did not only reinforces the conclusion to which I have come.

65 I start the analysis with some sympathy for Actrol's initial position. Reece had recently acquired the company and was stamping its authority on it. Actrol was losing staff and I make no value judgment in this regard. Mr Coppi's views on this subject are not relevant to any issue in the proceeding. Actrol lost Mr Bicket to Totaline and rightly suspected that Mr Coppi was headed in the same direction. There was the factory re-set, which raised fears, and other matters fed into an understandable concern. The situation seemed to be deteriorating quickly. My sense of Mr Nikolic's evidence is that he felt he needed to take control, which was indeed his responsibility as (in effect) the managing director. This resulted in the adoption of a risk-management strategy, although one that was heavily dependent upon litigation as the main tactic.

66 However, the search order and the processes of inspection and discovery that it unleashed did not establish significant wrongdoing on the part of Mr Coppi. It was not shown that he had been collaborating with Totaline or anyone else. It was not shown that he had passed confidential information to Totaline. In preparing for and conducting the trial, and in closing submissions, Actrol sought to make mountains out of molehills in relation to some alleged misconduct on the part of Mr Coppi. These submissions were self-serving. Actrol should have conceded early in the litigation that the smoke it smelt did not come from a significant fire, if from any fire at all.

67 When a party commences civil litigation, the usual rule is that the successful party obtains an order for costs, subject to certain qualifications and now the Civil Procedure Act. Mr Coppi was entitled to defend himself against Actrol's proceeding as he did. He was being pursued aggressively and was at significant financial risk. He was entitled to ensure that there was equality of arms, which he did by engaging competent and experienced solicitors, and senior and junior counsel. As time passed, the legal costs on his side rose quickly in direct response to Actrol's conduct of the proceeding. As they did so, settlement on a 'walk-away' basis was always going to become more and more difficult, especially because Mr Coppi was an individual who was personally funding his own legal costs.

68 In my view, every offer to settle the proceeding that Actrol made was reasonably refused by Mr Coppi. In the facts and circumstances obtaining on the occasion of each such offer, a reasonable assessment of the costs and benefits on Mr Coppi's side did not point to settlement on the terms offered. None of the offers reflected a realistic assessment of Actrol's likelihood of success (that is to say, failure) as to liability or costs at the relevant time. The early offers expected Mr Coppi to make a payment towards Actrol's legal costs, which he was fully entitled to reject. There were three 'walk-away' offers, but these came way too late and expected Mr Coppi to pay his own (increasing) costs, which he was also fully entitled to reject. There was then the final offer made by Actrol based on a contribution towards his costs of $30,000. As his costs were then about $294,000, this offer was manifestly inadequate.

69 In my view, Actrol unreasonably rejected every offer to settle the proceeding that Mr Coppi made. From 16 June 2015 when he made the first offer to 26 November 2015 when he made the last offer, the factual position was reasonably clear: Actrol's claims of serious wrongdoing against Mr Coppi were not established and its claim for damages was never going to be very great and became purely nominal. Worse than that, by about mid-July 2015 it was persisting with the proceeding on principle and for nominal damages only. It should have been clear to Actrol even at that time that it was at serious risk of not obtaining an order for costs even if it established some minor wrongdoing on the part of Mr Coppi and, in consequence, obtained an order for nominal damages against him. Even in that event, the court would, in all likelihood, have ordered Actrol to pay Mr Coppi's costs upon the basis that he was the substantially successful party. Reasonable assessment of the costs and benefits on Actrol's side on the occasion of each of Mr Coppi's offers pointed to acceptance thereof. Rejection of Mr Coppi's offer of 26 November 2015 on day two of the trial, which was predicated upon him being left $130,000 or so out of pocket, was especially unreasonable, given its generosity, the stage of the proceeding and that Actrol had announced by that time that it was seeking only nominal damages at trial.

70 In the detail I have provided as to the course of the proceeding is to be found frequent emphasis by Mr Coppi's solicitors on the unlikelihood of Actrol obtaining an order for costs (because it has suffered no compensable loss and damage and later was claiming only nominal damages) and its obligations under the Civil Procedure Act. I hope that such well-researched and formulated letters receive more attention by receiving parties (and their legal representatives) than Actrol apparently gave them in the present case. In the facts and circumstances obtaining during each successive milestone in the negotiations between the parties, the points made by Mr Coppi's solicitors were not answered adequately by Actrol, perhaps because they were virtually unanswerable. I hold against Actrol its failure to respond to these letters by reappraising its situation.

71 From about mid-July 2015, Actrol's solicitors began emphasising the significance of going to trial for nominal damages because this had 'precedential value to the plaintiff in demonstrating that the plaintiff is willing to enforce its legal rights'. In closing submissions, Actrol has contended that establishing a right to place Mr Coppi on leave with pay during the period of his resignation notice was an important principle. Even accepting that emphasis and those submissions does not give the issues in the proceeding an importance that they inherently lack. It is not that going to trial would not establish that Actrol was willing to enforce its legal rights. It would have established this, although the proceeding itself was demonstration enough. It is not that a judgment on the legal issues in the proceeding would have no precedential value whatsoever, for the judgment might have some. The real point is that, putting Actrol's case at its very highest, it objectives were very modest from a quite early stage, especially considering that the only relief sought was an order for nominal damages.

72 Taking these findings into account, I can now apply s 24 of the Civil Procedure Act to the facts and circumstances of the case. I will work through the elements of the obligation in reverse. The amount in dispute was purely nominal. I would have awarded $1 by way of nominal damages. The issues in dispute were of moderate complexity only, especially after the search order, inspection and discovery process was completed. The issues were of relatively minor importance, especially (again) after the completion of that process. The legal and other costs that Actrol incurred in the proceeding were in the vicinity of $600,000. That amount is manifestly not reasonably proportionate to the moderately complex and relatively minor importance of the issues in dispute which, in amount, represented purely nominal value. There were reasonable endeavours that Actrol could have taken to ensure that such costs were not incurred, such as making reasonable settlement offers and, failing acceptance of such, bringing the proceeding to the court for a disposition hearing rather than an expensive trial. In my view, there was a clear, indeed egregious, contravention of Actrol's overarching obligation to ensure costs were reasonable and proportionate.

73 That brings me to whether and what relief should be granted.

74 The issue that must here be determined is whether an award by way of nominal damages should be made in favour of Actrol or whether the proceeding should be dismissed under ss 28(1) and 29(1) of the Civil Procedure Act. In my view, the proceeding should be dismissed.

75 It is appropriate to begin by recognising that, in this proceeding, Actrol has successfully established that it had a contractual right to direct that Mr Coppi take leave with pay during the period of his resignation notice and that, for one day, he breached his contract of employment and duty of loyalty and fidelity by undertaking inconsistent employment with another employer. Although Actrol suffered no compensable loss by reason of this breach, it is entitled (but for dismissal) as of right to an award for nominal damages. By reference to authorities of long-standing, the applicable legal principle was stated in Simply Irresistible Pty Ltd v Couper[26] by Kyrou J: 'A party that has breached a contract is liable to pay at least nominal damages, even if the breach has not caused any loss.[27]' No legal or equitable principle applying in the present case makes Actrol's access to relief by way of nominal damages discretionary.

76 Actrol's entitlement to an award of nominal damages as of right would be defeated by an order dismissing the proceeding under ss 28(1) or 29(1). In the exercise of the court's discretion, this is a reason against making such an order. I also take into account that such an order would place Actrol in a (somewhat) worse position in relation to costs.

77 Perhaps the strongest reason against exercising the court's discretion to make a dismissal order is that the trial has ended and final judgment is about to be delivered. This is a very late stage at which to make a discretionary dismissal order. Mr Coppi has not previously sought such an order, as he might have done earlier upon the same grounds. On one view, it would be more appropriate to make an order for nominal damages and take Actrol's contravention of its overarching obligation into account on the question of costs. In practical terms (as will be seen), virtually the same result would thereby be achieved.

78 Weighing up the competing considerations, in my view an order for dismissal of the proceeding should be made under s 28(1) taking into account Actrol's contravention and under s 29(1) in the interests of justice. Doing so would give effect to the overarching purpose in s 7(1), as required by s 8(1).

79 The most important consideration in favour of an order dismissing the proceeding is that Actrol has achieved the end of establishing an entitlement to nominal damages as of right by means involving an egregious contravention of an important overarching obligation, one that is central to the objectives of the Civil Procedure Act (see above). In the facts and circumstances of the case, it should not be allowed to enjoy even the nominal fruit of its entirely pyrrhic victory. An order by way of nominal damages in favour of Actrol would not properly represent the judgment of the court in this proceeding. Exercising the power of dismissal in the Civil Procedure Act saves the court from the embarrassment of having to make an order for nominal damages in favour of a contravening party and then dealing with the consequences of the contravention only in the context of costs. The interests of justice would be better served in this case by dealing with the contravention at a more fundamental level (I say nothing about other cases, which will turn upon their own facts and circumstances).

80 Further, a dismissal order directly responds to the evidence that Actrol has fought the proceeding to final judgment for nominal damages on a point of only modest principle. Making a dismissal order demonstrates unequivocally that, when parties are determining whether, in their own interests, to pursue expensive civil litigation merely for reasons of principle, the values enshrined in the Civil Procedure Act must also be taken into account. The choices that are made potentially affect important public interests,[28] including the interests of justice, the objects specified in s 9(1), the overarching purpose in s 7(1) and, centrally, the overarching obligation in s 24 of ensuring reasonable and proportionate costs. Taking these into account, a court might, in an appropriate case like the present, decide that the intended end did not justify the chosen means.

81 There is an extensive discussion in the authorities of the application of the Civil Procedure Act in the context of costs. I refer to this below (see also above). Aspects of this discussion are relevant in the present context, especially the current emphasis given to the use of orders by way of costs to sanction parties, legal representatives and others who have contravened their overarching obligation. I take this into account here.

82 In my view, the court possesses power to dismiss the present proceeding under s 28(1) and, taking into account Actrol's contravention of its overarching obligation, should exercise it. This is especially so because the nature of its contravention has some analogies with abuse of process,[29] including abuse constituted by oppression of a relatively unequal party. The court's new power in s 29(1) to make any order it considers appropriate should also be exercised to make an order dismissing the proceeding because it is in the interests of justice to do so. This is especially so having regard to the overarching purpose in s 7(1) (in this regard, see the court's obligation in s 8(1)), the objects in s 9(1) and, particularly, the overarching obligation in s 24(1) of ensuring reasonable and proportionate costs.

83 I make the dismissal order against Actrol, not in favour of Mr Coppi. It is done by way of sanction of one party, not by way of compensation (for prejudice) of the other party. Actrol will thereby be deprived of the fruits of a pyrrhic victory that was obtained by illegitimate means: this is a pupose of the order. Mr Coppi will thereby be (somewhat) advantaged and Actrol will thereby be (somewhat) disadvantaged in relation to costs: this is a consequence not a purpose of the order.

84 The particular course of the proceeding justifies making an order by way of final judgment that the proceeding be dismissed. But, ideally, the contravention and its consequences should have been brought to the attention of the court earlier. I do not criticise Mr Coppi and his solicitors for not doing so. They did everything they could to impress the importance of the overarching obligations upon Actrol and its solicitors. One step they might have taken was to bring the proceeding to court for a disposition hearing. By that I mean a hearing in which final orders could have been made, including orders as to costs, upon the basis of a much shorter trial of the issues which could have been conducted only for the purposes of making such final orders. Another possible step might have been seeking directions from the court in relation to how the matter should be dealt with. These are observations made with the wisdom of hindsight, not criticisms. In all of the facts and circumstances of this case, these observations are not reasons for not making a dismissal order at this late stage. But in future like cases, early consideration should be given to bringing the contravention and its consequences to the court in an appropriate way at an early stage.

85 For these reasons, under ss 28(1) and 29(1) of the Civil Procedure Act the proceeding will be dismissed.[30]

86 The issues now to be determined concern the orders as to costs that should be made by the court and whether these should be on a standard or an indemnity basis. In case this proceeding is taken elsewhere, I will give judgment on primary and alternative bases.

87 As I have noted, the general rule as to the costs is that successful parties usually obtain an order for costs in their favour. Although the application of the rule is more nuanced in the 21st century and the provisions of the Civil Procedure Act are relevant, identifying the successful party is still an important starting point.[31]

88 Under the order for dismissal that I will be making, Mr Coppi is the successful party. There is no basis for treating him differently because he was not successful on some issues.[32] He is the substantial victor in the proceedings.

89 The only other order I might have made is an order for nominal damages in the amount of $1 in favour of Actrol. This would have reflected an entitlement as of right to such an order by reason of the limited success that it achieved in the proceeding in relation to some issues of liability. But even if it had succeeded in relation to all of the issues of liability, it would have obtained only the same order for nominal damages. The analysis that follows therefore applies to both the actual and hypothetical scenarios.

90 Historically, nominal damages were regarded as 'a mere peg on which to hang costs'.[33] In those days, the rule of awarding costs in favour of the successful party was applied strictly. This reflected the rather determinist notion that an award of even token damages in favour of a party represented the nomination of that party as the successful party for the purposes of the application of the rule.

91 A review of the authorities reveals that a party obtaining an award of nominal damages is no longer automatically regarded as a successful party for the purposes of costs. In this court, Robson J conducted such a review in NCON Australia v Spotlight Pty Ltd (No 7)[34] and so held. I would follow his Honour's decision, with which I respectfully agree.

92 For the position in the Supreme Court of New South Wales, Robson J in NCON referred (among other authorities) to the decision of Campbell JA (McColl JA and Handley AJA agreeing) in Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd.[35] In Rockcote, Campbell JA referred to his early judgment in Mid-City Skin Cancer and Laser Centre v Zahedi Anarak[36] in which his Honour explained that the modern rule was that a party obtaining only an award of nominal damages was not regarded as the successful party for the purposes of costs.[37] The judgments of Campbell JA in Mid-City and Rockcote were approved by McColl JA (Ward JA agreeing) in State of New South Wales v Stevens.[38] Referring to these judgments, Sackville AJA held that the old rule had been 'largely dismantled'.[39]

93 The position in Western Australia is represented by Motium Pty Ltd v Arrow Electronics Australia Pty Ltd.[40] The judgment of McClure P, Newnes and Murphy JJA contains a helpful discussion of the concept of nominal damages.[41] On the basis of this discussion, their Honours summarised the principle thus:

While each case must depend upon its own facts, where it is not a primary purpose of proceedings simply to establish or vindicate some legal right but the primary purpose is to recover substantial damages, ordinarily an award of nominal damages will not entitle a party to the costs of the proceedings ... In such a case, the party has obtained something of no real use to them and something which, if they had known it was all that was available, they would not have brought proceedings to recover. It would be contrary to modern notions of the efficient and cost-effective use of judicial resources to enable a party to recover its costs for a pyrrhic victory, having substantively failed in the action.[42]

94 The Full Court of the Federal Court of Australia has also rejected the relevance of the general rule in modern circumstances. Spender, Nicholson and Finn JJ discussed the authorities in Nexus Minerals NL v Brutus Constructions Pty Ltd and Kozyrski.[43] Their Honours referred to the modern rule in England, citing[44] with approval the following passage from the judgment of Devlin J in Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd:[45]

No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct. In applying that rule, however, it is necessary to decide whether the plaintiff really has been successful, and I do not think that a plaintiff who recovers nominal damages ought necessarily to be regarded in the ordinary sense of the word as a 'successful' plaintiff. In certain cases he may be, e.g., where part of the object of the action is to establish a legal right, wholly irrespective of whether any substantial remedy is obtained. To that extent a plaintiff who recovers nominal damages may properly be regarded as a successful plaintiff, but it is necessary to examine the facts of each particular case.[46]

Spencer, Nicholson and Finn JJ went on to approve of the judgment of Stephenson LJ (Griffiths and Purchas LJJ agreeing) in Alltrans Express Ltd v CVA Holdings Ltd[47] who stated that nominal damages 'was not the event at which the plaintiffs were aiming' and did not enable the plaintiffs to be regarded as successful.[48] Stephenson LJ considered that the analysis of Devlin J in Anglo-Cyprian had 'the force of common sense'.[49] After referring to these English cases, Spencer, Nicholson and Finn JJ in Nexus Minerals stated:

An award of nominal damages ought not today be regarded as a 'peg on which to hang costs': cf Beaumont v Greathead [1846] EngR 257; (1846) 2 CB 494 at 499; see McGregor on Damages, paras 404-405, Sweet & Maxwell, London, (1988, 15th ed); see also Burrows, Remedies for Tort and Breach of Contract, 269-270, Butterworths, London (2nd ed 1994).[50]

95 As can be seen, in making that statement, Spencer, Nicholson and Finn JJ adopted the analysis in the 15th edition of McGregor on Damages. The learned author of that text ends his analysis of this subject in the 17th edition[51] by citing the judgment at first instance in Hyde Park Residences Ltd v Yelland[52] where Jacob J stated plainly:

It seems to me that the whole question of nominal damages is at the end of this century far too legalistic. A plaintiff who recovers only nominal damages has effectively lost and in reality the defendant has established a complete defence.[53]

96 The leading Australian text is Law of Costs.[54] Referring to the old rule that an award of nominal damages was a peg on which to hang an order for costs, the learned author states:

In more recent times, however, courts have doubted whether a plaintiff who recovered only nominal damages should, for the purposes of exercising the costs discretion, be regarded as successful.[55]

Emphasising the fact-intensive nature of the inquiry, the author goes on to say:

The matter ultimately rests on the facts of each case. The award of nominal damages will not necessarily deny success for costs purpose if some other right is vindicated by the judgment. For instance, if the aim of the suit is to establish a legal right, wholly irrespective of whether any substantial remedy is obtained, a plaintiff who recovers nominal damages may, to that extent, properly be regarded as a successful plaintiff. But in other circumstances, especially if the aim of the suit is to secure a substantial award of damages, an award of nominal damages may be seen as a failure by the plaintiff to establish the claim.[56]

97 In cases where the aim of the proceeding is to establish a legal right, I think the award of damages is not necessarily a mere peg upon which to hang costs. The damages, although nominal, might represent vindication of the right. This is reflected in the description of nominal damages given by Lord Halsbury in The Mediana:[57]

'Nominal damages' is a technical phrase which means that you have negatived anything like real damage, but that you are affirming by your nominal damages that there is an infraction of a legal right which, though it gives you no right to any real damages at all, yet gives you a right to the verdict or judgment because your legal right has been infringed.[58]

98 The function of nominal damages as vindication is potentially important in some cases. Examples might include actions in tort for personal assault where the damages are nominal but the injury to dignity is not or actions to establish a legal right that is of present and continuing significance to the claiming party but does not yet sound in significant damages. As submitted by Actrol, the entitlement to pursue relief in such circumstances is reflected in the modern rule that a declaration of right may be the only relief claimed in a proceeding.

99 Applying these principles to the present case, I would conclude that, even if an award of nominal damages of $1 had been made in favour of Actrol, it would not have been regarded as the successful party. It started the proceeding claiming general damages (among other things) for breach of contract and duty. I infer that it amended the statement of claim to specify a claim for nominal damages after coming to appreciate that it could prove no compensable loss or damage. If Actrol thought that amending the statement of claim to include nominal damages was a sufficient basis in itself for persisting with the proceeding, this was misconceived. Actrol was aiming at general damages, which it could not prove, and the amendment to include nominal damages did not give the proceeding a vitality that it did not otherwise possess. Obtaining these damages did not make it the successful party.

100 In order to persuade the court that the proceeding did possess vitality apart from the claim for nominal damages, Actrol submitted that it was seeking vindication of its legal rights. In this connection, it pointed to its right to place Mr Coppi on leave with pay during the period of resignation notice and demonstrating that it was prepared to defend its rights generally. The submissions of Actrol in this regard gain some general support from Lord Halsbury's statement in The Mediana and aspects of the discussion in the Law of Costs.

101 But Actrol's claims based on vindication and asserting its legal rights are highly generalised and not anchored in any particular need to establish or assert those rights. It is difficult to avoid the conclusion that the claim for vindication, like the claim for nominal damages with which it was connected, was just a strategic response to being unable to prove compensable loss and damage. In the particular facts and circumstances, establishing a contractual right to place Mr Coppi on leave with pay during the resignation notice period, and the generalised assertion of Actrol's legal rights, are hardly worthy subjects of vindication in expensive civil proceedings in this court. Further, the determination of the first mentioned issue was always going to be case-specific. The court would never have allowed this and the other issues raised by Actrol to be the subject of a proceeding claiming only a declaration of rights. Such a proceeding would have been dismissed in the exercise of the court's discretion as lacking present and continuing relevance and utility. Actrol was entitled to assert its rights by commencing this proceeding and obtaining the search order. Having regard to the limited results of the search, inspection and discovery process and its failure to prove compensable loss and damage, it should then have taken stock. By mid-July 2015, there was no sufficient present and continuing reason for seeking vindication. Actrol's submissions to the contrary are rejected.

102 For these reasons, even if Actrol had obtained an order for nominal damages of $1, the court would have regarded Actrol as the unsuccessful party and Mr Coppi as the successful party.

103 As Mr Coppi is the successful party in the proceeding, according to the general rule he is entitled to an order for costs unless there is some reason justifying a different result.[59] There is no such reason. Moreover, taking into account the contravention of Actrol's overarching obligation to ensure costs are reasonable and proportionate, it is appropriate that an order for costs should be made against Actrol (see below).

104 Under s 24(1) of the Supreme Court Act 1986 (Vic), costs are 'in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid'. Rule 63.02 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) provides that the power and discretion of the court under s 24 of the Supreme Court Act should be exercised in accordance with O 63. Rule 63.28 provides that:

Subject to this Part, costs in a proceeding which are to be taxed shall be taxed on -

(a) a standard basis;

(b) an indemnity basis; or

(c) such other basis as the Court may direct.

Under r 63.31, the usual basis for ordering and taxing costs is the standard basis, unless the court orders otherwise. The issue that must be determined is whether costs should be ordered on a standard or indemnity basis. It should be noted that, under these provisions, the purpose of even an order for indemnity costs is compensatory, not punitive or disciplinary.

105 The provisions of the Civil Procedure Act are relevant to the exercise of the court's discretion in relation to costs. I have already referred to these provisions, especially s 28(1) and (2) and s 29(1). Here we will see that costs orders may be issued by way of sanction.

106 I reject the submissions of Actrol that Mr Coppi brought the proceeding and its continuation upon himself. Nothing in his conduct before and after the proceeding was commenced could be reasonably so described. At all times, Actrol commenced and prosecuted the proceeding in its own interests.

107 I have found that Actrol unreasonably rejected all of Mr Coppi's offers of settlement. The first such offer was made on 16 June 2015. In accordance with the principles expounded in Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2),[60] costs should at least be ordered against Actrol on an indemnity basis from that date and on a standard basis prior thereto.

108 The principles governing the making of orders as to costs on an indemnity basis were discussed by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd.[61] According to these principles, such an order should not be made unless there be 'some special or unusual feature in the case to justify the Court in departing from the ordinary practice'.[62] His Honour gave examples of such features, including 'particular misconduct that causes loss of time to the Court', continuing proceedings 'in wilful disregard of known facts or clearly established law' and unreasonably refusing offers of compromise.[63] Similar principles were discussed by Harper J in Ugly Tribe Company Pty Ltd v Sikola.[64]

109 These principles supply an additional ground for ordering costs upon an indemnity basis against Actrol from 16 June 2015. By this time (at least) Actrol should have appreciated that it had no reasonable foundation for continuing the proceeding. It must have been clear that it could not prove compensable loss and damage and would very likely have costs awarded against it at trial.[65] To continue with the litigation in these circumstances was totally unreasonable and 'high-handed'.[66] In these circumstances, it would be appropriate to make an order that fully compensates Mr Coppi for the costs that he incurred after that date.

110 It is now necessary to consider the provisions of the Civil Procedure Act, especially ss 28 and 29. These provisions are to be found in pt 2.4. As made clear by the heading thereto, it contains provisions for sanctioning contraventions of the overarching obligations. As we have seen, the purposes of the powers of the court under s 24 of the Supreme Court Act and O 63 of the Supreme Court (General Civil Procedure) Rules are compensatory (even where indemnity costs are ordered). By contrast, where contravention is established the powers of the court under pt 2.4 of the Civil Procedure Act are wider[67] and have both compensatory and punitive elements.[68] The proper exercise of these powers has been judicially considered in this court.[69]

111 In the present case, I have found against Actrol an egregious contravention of its overarching obligation to ensure costs are reasonable and proportionate. The course of the proceeding that I have described (which Actrol effectively controlled) is deserving of strong sanction by the court. Although I take the proceeding to have been commenced and initially prosecuted appropriately, the conduct of the proceeding by Actrol after about mid-June 2015 was completely unacceptable. Actrol's egregiously contravening conduct of the proceeding thereafter, especially in causing the trial to run to final judgment, has been such as to (dis)colour the whole character of the proceeding from start to finish.

112 In my view, the court must appropriately sanction Actrol's contravening conduct. That sanction would not, in the circumstances, be adequately represented by an order for costs in favour of Mr Coppi on an indemnity basis only from mid-June 2015, especially as this would have been the order under the existing rules with respect to unreasonably refusing offers of settlement and indemnity costs (see above). By way of sanction, Actrol should be ordered to pay Mr Coppi's costs (including any reserved costs) on an indemnity basis from the commencement of the proceeding. I will so order.

113 As revealed by this judgment, the course of this proceeding has been rather ordinary at a superficial level. Mr Coppi resigned his employment with Actrol and commenced new employment with a competitor. Fearing that Mr Coppi had abused his responsibility to keep company information confidential, Actrol obtained a search order from the court against him. Nothing much was discovered suggesting that Mr Coppi had passed confidential information on to third parties. The proceeding dragged on. When the parties failed to settle their differences, it went to trial with Actrol alleging breach of contract and certain duties of employment and Mr Coppi denying these allegations.

114 However, the course of the proceeding has been quite extraordinary at a fundamental level. Suspecting that Actrol had suffered no compensable damage by reason of the alleged breaches of contract and duty, Mr Coppi's solicitors constantly pressed Actrol's solicitors to give particulars of its loss. Actrol did not do so. Over time it became clear that it had not suffered any or any significant compensable loss. It also became clear that the alleged breaches of contract and duty were relatively minor in nature. Actrol refused reasonable settlement offers and costs escalated on both sides. Actrol amended its statement of claim and went to trial with a claim for purely nominal damages on a point of modest principle, conceding that it had suffered no compensable loss by reason of the alleged breaches of contract and duty on the part of Mr Coppi. At the seven day trial on liability, each party was represented by senior and junior counsel instructed by solicitors.

115 Actrol is a wholly owned subsidiary of a publicly listed company (Reece Australia Ltd). Mr Coppi is an individual - married with two children, earning about $100,000 per annum and funding his own legal fees. The family home is charged with those fees. There is great disparity of resources between the parties. On the information provided to the court, Actrol has expended in the vicinity of $600,000 in legal costs in conducting the proceeding. Mr Coppi has expended in excess of $300,000 in legal costs in defending the proceeding. Having regard to the complexity and importance of the issues in dispute, which are no more than moderate and minor respectively, and the amount in dispute, which is actually nominal, these amounts are totally unacceptable. For the reasons explained in this judgment, it is Actrol who must be held responsible, essentially because it has egregiously contravened its overarching obligation under s 24 of the Civil Procedure Act 2010 (Vic) to ensure costs are reasonable and proportionate. That is to be reflected in orders dismissing the proceeding and for indemnity costs in Mr Coppi's favour.

116 I accept that Actrol conducted the proceeding against Mr Coppi because it was thought necessary in the best interests of the company in managing apprehended risks to those interests. But the legal system is not an infinite resource for the management and mitigation of business risks of whatever nature and degree. Modern case management principles and the provisions of the Civil Procedure Act insist upon reasonable proportionality between the achievement of litigious objectives (having regard to the issues raised in the proceeding) and the legal costs that are expended in the pursuit of those objectives. There must be reasonable proportionality between those ends and those means.

117 Having regard to the course of the proceeding, it is not surprising that senior counsel for Mr Coppi has called for judicial criticism of Actrol's conduct and pointed to the implications of that conduct, if not sanctioned, for the conduct of civil litigation generally. I take this into account in making final orders (see below).

118 I must draw the attention of all parties to civil litigation to their responsibilities under the case management principles of the court and the Civil Procedure Act. Let not the course of this proceeding ever be repeated unless the complexity and importance of the issues, and the amount, in dispute makes this reasonably necessary. Let it be understood that the court is prepared to exercise its enhanced and new powers in relation to civil proceedings in quite fundamental ways when this is called for, especially where the overarching obligation to ensure costs are reasonable and proportionate is contravened.

119 The proceeding is dismissed and Actrol is to pay Mr Coppi's costs, including any reserved costs, on an indemnity basis, such costs to be taxed by the Costs Court in default of agreement.

I certify that this and the 4341 preceding pages are a true copy of the reasons for judgment of Bell J of the Supreme Court of Victoria delivered on 23 December 2015.

[1] Actrol Parts Pty Ltd v Coppi (No 1) [2015] VSC 670 (9 December 2015) ('Actrol Parts (No 1)').

[2] Actrol Parts Pty Ltd v Coppi (No 2) [2015] VSC 694 (9 December 2015) [101] ('Actrol Parts ( No 2)').

[3] Actrol Parts (No 1) [2015] VSC 670 (9 December 2015) [10]-[12].

[4] See Director of Consumer Affairs v Scully (No 2) [2011] VSC 239 (1 June 2011) [22] (Hargrave J); Chan v Chen [2013] VSC 538 (11 October 2013) [40], [69]-[71] (Digby J) ('Chan'); Hudspeth v Scholastic Cleaning and Consulting Services Pty Ltd (No 8) [2014] VSC 567 (20 November 2014) [27]-[31] (John Dixon J); Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5) [2014] VSC 410 (15 December 2014) [77]-[89] (John Dixon J) ('Dura').; now see also Actrol Parts (No 1) [2015] VSC 670 (9 December 2015) [27]-[28] (Bell J).

[5] See Jeffrey v Curnow [2015] VSCA 70 (24 April 2015) [17] (Warren CJ and Tate JA, Ginnane AJA agreeing); Wingfoot Australia Partner Pty Ltd v Jovevski [2014] VSCA 21 (26 February 2014) [59] (Warren CJ, Tate and Osborn JJA); Yara Australia Pty Ltd v Oswal (2013) 41 VR 302, 305-11 [5]-[27] (Redlich and Priest JJA, Macaulay AJA) ('Yara').

[8] See also s 9(1) and (2).

[9] D C Pearce and R S Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 7th ed, 2011) [5.27].

[10] Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303, 323 [56] (French CJ, Kiefel, Bell, Gageler and Keane JJ).

[11] Yara [(2013) 41 VR 302, 311 [25] (Redlich and Priest JJA, Macaulay AJA).

[12] [2013] VSC 538 (11 October 2013).

[19] Ibid 286; approved by Slaveska v State of Victoria [2015] VSCA 140 (10 June 2015) [154] (Warren CJ, Tate JA and Ginnane AJA).

[23] Victoria, Parliamentary Debates, Legislative Assembly, 24 June 2010, 2607 (Attorney-General Rob Hulls).

[26] [2010] VSC 601 (17 December 2010) [397].

[27] See, eg, Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd [1938] HCA 66; (1938) 61 CLR 286, 305 (Latham CJ), 311-12 (Dixon J); Huppert v Stock Options of Australia Pty Ltd [1965] HCA 30; (1965) 112 CLR 414, 424 (Barwick CJ), 431 (Taylor J); Chappel v Hart (1998) 195 CLR 232, 270 [93] (Kirby J), 290 [149] (Hayne J).

[28] See Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175, 189-92 [25]-30] (French CJ).

[29] See Sea Culture International Pty Ltd v Scoles [1991] FCA 523; (1991) 32 FCR 275, 279 (French J).

At a glance

Court

Decision date

Before

Source

Judgment (230 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (15)