On 18 May 2022, I published reasons for ordering the prospective defendant, Mr Shillington, to provide preliminary discovery of several categories of documents sought in the Amended Summons filed by the plaintiff, BGC Securities: BGC Securities (Australia) Pty Limited v Shillington [2022] NSWSC 611 (Judgment).
These reasons deal with the issue of costs and assume familiarity with and adopt the same terms as those used in the Judgment.
In the Judgment, I expressed a tentative view that BGC Securities should be ordered to pay Mr Shillington's costs of the preliminary discovery application in addition to the costs of giving preliminary discovery, noting that each party had obtained some success in the application and the defendant had not acted unreasonably in contesting the application, having also offered to give discovery in accordance with revised category 6: Judgment at [101] and [102]. That view was not final and was subject to considering the submissions of the parties who wished to be heard on the issue of costs.
In accordance with directions made by the Court, the parties have provided written submissions and the issue of costs is to be dealt with on the papers.
There is no dispute that BGC Securities should be ordered to pay Mr Shillington's reasonable costs of providing preliminary discovery in accordance with the orders made on 18 May 2022. The issue between the parties relates to the costs of BGC Securities' application for preliminary discovery.
BGC Securities contends that it is not appropriate for the Court to order it to pay Mr Shillington's costs of the application having regard to the adversarial approach adopted by Mr Shillington, his reliance on the wrong test (as formulated by Hely J in St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360 rather than the test set out in O'Connor v O'Connor [2018] NSWCA 214 which was applied by this Court) and the substantial success that BGC Securities had on the application. It submits that, in all the circumstances, the appropriate costs order is that each party should bear their own costs of the preliminary discovery application but without prejudice to any claim that is later made by BGC Securities in substantive proceedings in relation to the underlying dispute.
Mr Shillington submits that his costs should be paid by BGC Securities, adopting the tentative view expressed in the Judgment. He argues that such an order would represent a fair exercise of the Court's discretion given the extent to which BGC Securities was unsuccessful and the reasonableness of Mr Shillington's conduct in resisting the application. He referred the Court to a preliminary discovery case in which it was recognised that costs should not follow the event and the successful applicant was ordered to pay the respondent's costs: Arnaout v Arnaout [2019] NSWSC 565; Guest v Guest (No 2) [2016] VSC 76.
While there may be no "fixed rule" or "automatic entitlement" to costs in preliminary discovery applications (Renton v Kelly [2018] NSWSC 1377 at [14], [15] and [56]), there is a line of authority that recognises that if a defendant takes an adversarial approach to the application and fails then, consistent with the Uniform Civil Procedure Rules 2005 (NSW), r 42.1, it will normally be appropriate for the Court to order that costs follow the event, with the "event" being success or failure in relation to the application to produce documents, unless it appears that some other order should be made: Airways Corporation of New Zealand & Anor v The Present Partners of Pricewaterhouse Coopers Legal & Anor [2002] NSWSC 521 at [10]-[11] (Airways); Equiti Capital Limited v Hewson [2015] NSWSC 1388 at [14] - [16] citing Procter v Kalivis (No 3) [2010] FCA 1194 at [17]; Ainsworth & Anor v Stapleton Johnson & Partners [2020] NSWSC 252 at [21]-[23] (Ainsworth); Gooley & Ors v Breda Pty Ltd & Ors (No 2) [2017] NSWSC 1505 at [5]-[6].
As noted in BGC Securities' submissions, Simpson J observed in Airways at [11], cited by Campbell J in Ainsworth at [21], in relation to a party taking an adversarial approach in preliminary discovery proceedings that:
"...the consequences of their making a judgment which turned out to be wrong are the same as such consequences for any other unsuccessful litigant."
In this case, I am satisfied that the costs of the preliminary discovery application should not simply follow the event, in the sense that I do not consider that BGC Securities should be awarded its costs for obtaining preliminary discovery relief, and that some other costs order should be made in relation to the contested application. However, having considered the parties' submissions, I am persuaded by BGC Securities that the tentative view I expressed in the Judgment would not represent a costs order that would be fair and proper having regard to the stance that Mr Shillington took on the contested application and BGC Securities' overall success in obtaining orders for preliminary discovery.
Mr Shillington was justified in contesting some aspects of the application. The outcomes make that plain. But I am unpersuaded by Mr Shillington's submissions that suggest that the overall outcome should be assessed from the perspective that "only 2 of the 11 categories sought by BGC Securities in its Amended Summons were ordered in unamended form" or that Mr Shillington's acted reasonably or was justified in contesting the entirety of the application.
The contest at the hearing was primarily directed to eight categories of documents (1 to 5, and 8 to 10). BGC Securities succeeded in obtaining discovery in respect of four of those categories (4, 5, 8 and 10), despite various arguments raised by Mr Shillington. BGC Securities failed on four (1 to 3, and 9). I accept that categories 4 and 10 as ultimately ordered were in more limited terms than those originally sought by BGC Securities. Even so, the Court ordered preliminary discovery in respect of those categories after rejecting Mr Shillington's primary contentions that there was insufficient material to satisfy the Court that BGC Securities may be entitled to make claims for relief, that BGC Securities had failed to make reasonable enquiries in relation to those claims and had sufficient information to decide whether to commence proceedings in respect of those claims for relief, and the limitations made to category 4 were proffered by BGC Securities during the course of the hearing.
Mr Shillington may have acted reasonably in making an offer in relation to revised category 6. However, as BGC Securities submitted, the offer he made in respect of that category on 1 October 2021 was on a "take it or leave it basis", without discovery to be provided under any other category. His unconditional offer was also only made late in the day, during the course of oral submissions at the hearing, and after his written submissions had raised objections to production for reasons including that BGC Securities' "asserted potential case is no more than speculation" (Outline of Submissions at 9). It is also a relevant factor in assessing Mr Shillington's conduct overall that some of the categories ordered reflected categories of documents that were first sought by BGC Securities in a letter of 24 August 2020, prior to the commencement of proceedings and to which he took objection for some time.
Further, not pressing category 11 of the Amended Summons did not have any impact on the proceedings. It was identified as not being pressed prior to the hearing and was not the subject of either party's written submissions.
Taking a global approach to costs, in my view, the order proposed by BGC Securities in relation to the costs of the application better reflects the nature and extent of the contest and outcomes on the application.
The costs order I will make will be final and enforceable in recognition that BGC Securities may not commence proceedings against Mr Shillington. However, they will also acknowledge that if BGC Securities commences substantive proceedings against Mr Shillington in relation to the underlying dispute as a consequence of the discovery provided, the effect of the orders may be varied by the court hearing those substantive proceedings.
For these reasons, I make the following orders:
1. Save as provided for in (2) and (3) below, no order as to costs with the intent that each party is to bear their own costs of the plaintiff's preliminary discovery application.
2. The plaintiff to pay the defendant's reasonable costs of compliance with the orders made on 18 May 2022, to be assessed if not agreed.
3. Note that these orders are made without prejudice to the right of either party to apply to the Court if the plaintiff commences substantive proceedings against the defendant as a result of the production of documents the subject of the orders made on 18 May 2022, for relief in those proceedings that has the effect of varying these cost orders.
[2]
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Decision last updated: 17 June 2022