[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[2]
Judgment
THE COURT: ASSK Investments Pty Ltd sued its former employee Mr Paul Tyrrell in May 2022 based on a claim of breach of confidence after he left to work for another smash repair business. ASSK is approved to provide repairs to Aston Martin and Jaguar cars; according to ASSK, the rival is not. The commencement of proceedings was preceded by correspondence between ASSK's solicitor and Mr Tyrrell, which ASSK contends was insufficiently candid. ASSK seems never to have sought interlocutory relief. The only substantive relief it sought was injunctive relief and orders for delivery up. After there was disagreement about providing documents informally, ASSK issued a motion for discovery, to which Mr Tyrrell consented, and thereafter formal discovery was given. The costs of that motion were reserved. ASSK thereafter sought leave to discontinue the proceedings.
The primary judge, Henry J, gave an ex tempore judgment. Her Honour found that ASSK had not displaced the default position in r 42.19 of the Uniform Civil Procedure Rules 2005 (NSW) for it to pay Mr Tyrrell's costs of both the proceedings and the motion: ASSK Investments Pty Ltd v Tyrrell [2023] NSWSC 271. Her Honour explained at [21] that the rule "provides a default position in relation to costs that is subject to the discretion of the Court, with the onus on the plaintiff to establish that there is some sound position or good reason for departing from the ordinary course whereby the plaintiff would be required to pay the costs of the proceedings: Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32, at [53]-[54]; see also Walton v Commonwealth Bank of Australia [2020] NSWCA 191, at [26]-[27]". ASSK seeks leave to appeal from her Honour's decision. It was not suggested there was any error in the formulation of the applicable principle.
ASSK Investments Pty Ltd v Tyrrell [2023] NSWCA 216 | Case summary | Zoe
Four points may be noted from the outset about the nature of this application for leave to appeal.
1. First, leave is required because the decision is confined to a question of costs: Supreme Court Act 1970 (NSW), s 101(2)(c).
2. Secondly, despite ASSK advancing no fewer than ten proposed grounds of appeal, none on its face identifies any question of principle or general importance.
3. Thirdly, the decision being discretionary, it is necessary for ASSK to establish House v The King error.
4. Fourthly, in order to warrant a grant of leave in a decision on costs which is relevant only to the parties, it is necessary not merely to show House v The King error, but House v The King error which gives rise to an injustice which is reasonably clear, as opposed to one that is merely arguable: see Boden v Gleeson [2013] NSWCA 447 at [15] and the decisions there cited.
The first eight proposed grounds of appeal are directed to her Honour's conclusion that Mr Tyrrell did not act unreasonably in failing to respond to ASSK's inquiries before it commenced litigation. None asserts any error of principle in the application of the discretion conferred by the rules. In substance, all are directed to the ultimate question: whether her Honour was wrong to have reached that conclusion. But all fall well short of establishing or even asserting that this was a case where there has been an injustice which is reasonably clear, as opposed to one that is merely arguable. ASSK's written submissions did not address any of those matters. In substance, they merely sought to reargue the matters raised before the primary judge, which her Honour considered at length, and rejected as a proper basis for departing from the default position under the rules. As much was pointed out by Mr Tyrrell's succinct written submissions in response.
However, in oral submissions advanced by Mr Neil KC, who did not appear below and did not sign the written submissions, the case for a grant of leave was propounded on the basis of a clear injustice, to which was added a submission that a more "collegiate" as opposed to technical approach was warranted in relation to both pre-commencement correspondence and informal discovery.
At the heart of ASSK's case on the merits is its claim that Mr Tyrrell in fact had certain information concerning the repair methods or procedures for Jaguar and Aston Martin vehicles. Before commencing proceedings, ASSK had asked somewhat different questions. ASSK's solicitor's letter asserted:
Our client is aware that you have - without our client's authority and in circumstances where you knew that our client would not have provided you with authorisation to do so:
(a) taken from our client estimates and images of repair methods for Aston Martin, Jaguar Land Rover and Bentley vehicles; and
(b) have used those documents and the know how contained therein as part of your employment at SVH and Prestige Autobody Shop.
That letter was emailed to Mr Tyrrell at 5.34pm on a Friday afternoon. On the Sunday, he replied "I have never taken estimates, images or repair methods from your client". It is now accepted by ASSK that that was true. At the heart of ASSK's submissions in this Court is the proposition that Mr Tyrrell should have volunteered something already known to ASSK, namely, that he had come into possession of documents relating to the repair of Aston Martin and Jaguar vehicles from another source.
ASSK had received two emails that were forwarded to it in October and November 2020 and which suggested that Mr Tyrrell had obtained what was said to be confidential information concerning the repair of Aston Martin and Jaguar vehicles. ASSK did not notify Mr Tyrrell of the particular emails in its possession on which its concerns seem to have been based. Instead, it wrongly accused him of taking documents from it, which he denied. Only after ordered to provide discovery did Mr Tyrrell confirm that he had such documents but that they had been provided to him by his new employer.
ASSK says that it was reasonable for it to commence proceedings, and reasonable for it to discontinue them following the receipt of Mr Tyrrell's discovery.
The primary judge gave careful consideration to this claim at [29]-[35] (the two emails are the "Emails", and the allegedly confidential information is the "Repair Methods"):
I do not accept that the defendant acted unreasonably in failing to respond to all of the plaintiff's enquiries in the pre-litigation stage.
It is apparent from the correspondence that the plaintiff sought information based on its suspicion that the defendant had taken the Repair Methods while working for the plaintiff and without its authority, and continued to use them as part of his employment at Prestige. Relevantly, in the initial letter of demand, the defendant was asked to cease using any estimates or Repair Methods taken from the plaintiff, to return them and to delete any electronic copies. The defendant's response, which was promptly provided two days later, clearly stated that he had never taken estimates, images or Repair Methods from the plaintiff and that he did not have any electronic copy or hard copy in his possession to delete. In response to a subsequent letter, the defendant also sought to address what he understood to be the basis of the allegations made by the plaintiff, namely that it related to an incident in mid-2018 relating to an NRMA Insurance claim, in the context where the plaintiff had not referred to the Emails in any of its demands.
I accept that there were further requests made by the plaintiff that were not fully responded to by the defendant. However, those requests were open-ended in the sense that they sought information as to the source of the Repair Methods in the defendant's possession rather than linking the requests to the plaintiff's claim that the Repair Methods documents were taken and retained in breach of obligations owed to the plaintiff.
It is unnecessary to go through all of the pre-litigation correspondence, but one matter stands out, which is as follows: at no time prior to commencing the proceedings did the plaintiff disclose to the defendant the contents of the Emails on which the plaintiff's suspicions were based. The plaintiff may have sought information about the Repair Methods that went unanswered or in a form that was unsatisfactory to the plaintiff, but those responses need to be considered in the context where the plaintiff did not disclose information that was central to its demands. If the plaintiff considers it reasonable to expect that the defendant should have provided more fulsome responses to its inquiries, it is also reasonable to expect that the plaintiff should have set out the basis of its concerns by reference to the Emails themselves, rather than waiting to disclose them in the statement of claim after the proceedings were commenced.
Further, the key issues raised in the pre-litigation communications and these proceedings were not whether the defendant had access to the Repair Methods or how he came to have them in his possession, but whether the Repair Methods was confidential information to the plaintiff and, if so, whether the defendant obtained them during the course of his employment with the plaintiff, retained them after he ceased his employment and subsequently used them in breach of confidentiality obligations owed to the plaintiff. It was on those issues that the defendant provided responses, maintaining throughout, and consistent with his defence, that he did not take or have in his possession any Repair Methods from the plaintiff and also contesting the allegation that the Repair Methods was the plaintiff's confidential information in any event.
In those circumstances, I consider there is force to the defendant's submission that the plaintiff commenced these proceedings based on an inference that the defendant had taken the Repair Methods from the plaintiff and perhaps, prematurely. In my view, the plaintiff took a risk when it commenced proceedings, including the risk of costs, having regard to the information available to it at the time, which included repeated denials from the defendant that he had taken the Repair Methods from the plaintiff.
It follows that I do not consider that the defendant acted unreasonably such as to warrant an order in relation to the proceedings, other than in accordance with r 42.19 UCPR.
None of that reasoning is demonstrably wrong so as to give rise to a clear injustice. To the contrary, it is correct. In particular, we do not accept that there was any basis for departing from the default position in the rules because of Mr Tyrrell's failure to volunteer fuller information concerning the materials in his possession when he had given a square answer to the questions he had been asked and in circumstances where ASSK had not only made an incorrect assumption but had also declined to put to him candidly the matters of which it was aware. We also note that no error was contended in other circumstances mentioned by the primary judge, which we also regard as clearly correct, namely, that there were difficulties in ASSK's case based on the employment contract, and on whether if indeed the documents were at any time confidential, ASSK was entitled to enforce that confidentiality (these points are now academic, since ASSK tendered them at the hearing without any confidentiality, a further point made by Mr Tyrrell at the hearing).
At the forefront of ASSK's oral submissions was a separate issue which gave rise to proposed grounds 9 and 10. This is a complaint about a particular aspect of the litigation. For around five weeks in late June and July 2022, there was correspondence concerning the provision by Mr Tyrrell of the documents claimed by ASSK to be confidential. ASSK's solicitor sought production informally, and offered confidentiality undertakings. Mr Tyrrell's solicitors sought a formal order for discovery. A notice of motion was filed seeking discovery, to which Mr Tyrrell consented, and pursuant to that regime provided an affidavit and documents. ASSK says that this was unreasonable, and should not have been necessary. It relied on statements made by Kunc J in Tugrul v Tarrants Financial Consultants Pty Ltd ACN 086 674 179 [No 5] [2014] NSWSC 437 at [64]-[77] to the general effect that legal practitioners should minimise the need for interlocutory disputes, and complained that although this decision was cited to the primary judge, her Honour did not refer to it.
There is nothing in this point. First, the primary judge gave a careful ex tempore judgment, at the parties' request, noting at the time she offered to do so that if she took that course, her reasons would be briefer. ASSK acceded to that course. Secondly, this was, self-evidently, a case where formal discovery was appropriate. Mr Tyrrell was employed by a rival to ASSK. There are obvious difficulties in him voluntarily providing ASSK with documents in his possession which were owned by his employer. Thirdly, the consent regime did not appreciably delay the litigation. Fourthly, consistently with what was said by Kunc J, the evidence discloses that the solicitors were in communication with one another, and not merely by formal correspondence (which was courteous) but also informally in order to minimise the time and costs on both sides. Fifthly, there was no evidence as to the costs involved in this minor aspect of the case (nor was there any evidence about the parties' costs overall) but there seems no reason to doubt that the additional costs of obtaining discovery by a consent motion as opposed to a regime agreed in correspondence were relatively small (and vastly exceeded by the costs of the application for leave).
The primary judge addressed this point at [36]:
As to the costs of the disclosure motion, I accept the plaintiff's contention that its solicitor took appropriate steps in an attempt to resolve and avoid an interlocutory dispute in relation to discovery. But I do not consider that the defendant can be criticised for seeking disclosure by compulsion in order to obtain the benefit of the protections of the implied undertaking: Hearne v Street [2008] HCA 36. In my view, the defendant acted reasonably by consenting to the disclosure motion, noting that his consent minimised costs and a party in this Court must show exceptional circumstances in order to obtain disclosure before evidence is filed: Practice Note SC Eq 11. In those circumstances, I consider that the costs of the disclosure motion should be dealt with as part of the proceedings, rather than subject to a separate order.
Once again, no error is contained in those reasons.
ASSK relied on the decision of In the matter of 1st Fleet Pty Ltd (in liq) and other companies [2017] NSWSC 506 where a liquidator commenced proceedings shortly before the expiry of a limitation period and where it was held that the defendant should have responded to the liquidators' inquiry. The facts were different, including that the liquidator had little choice before the limitation period expired to commence proceedings. This decision does not greatly assist ASSK to say that the discretion of the primary judge miscarried, let alone that there should be a grant of leave.
No basis has been made for the grant of leave from a decision not to depart from the ordinary operation of the rules as to costs when a party discontinues proceedings. Leave should be refused. There is no reason to displace the ordinary operation of the rules as to the costs of this appeal. ASSK must pay Mr Tyrrell's costs in this Court.
[3]
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Decision last updated: 11 September 2023