Coope v LCM Litigation Fund Pty Ltd

Brief facts

1. To understand this matter it is necessary to read Coope v LCM Litigation Fund Pty Ltd [2016] NSWCA 37. For present purposes, it is sufficient to recall that the proceedings arose out of an employment dispute between Mr Coope and LCM. Mr Coope was the former co-managing director of LCM. Mr Coope was summarily dismissed following an allegation that he engaged in serious misconduct by breaching his employment contract and his fiduciary duties in two respects. Those two matters were referred to in the primary judgment as the "Wind Down Proposal" and the "Separation Proposal".
2. In the proceedings before the primary judge, it was held that Mr Coope had engaged in serious misconduct by breaching his employment contract and his fiduciary duties in respect of the Separation Proposal but not the Wind Down Proposal. On appeal, it was held that Mr Coope had engaged in serious misconduct by breaching his employment contract and his fiduciary duties in respect of both the Separation Proposal and the Wind Down Proposal.

Costs order below

1. On 7 August 2015, the primary judge delivered a judgment in relation to costs: LCM Litigation Fund Pty Ltd v Coope; Coope v LCM Litigation Fund Pty Ltd (No 4) [2015] NSWSC 1158. His Honour concluded at [12] that: LCM has, overall, been successful in that it has justified its decision to terminate Mr Coope's Employment Contract. In those circumstances, it appears to me that costs must follow the event. But the appropriate costs order should reflect the issues not pressed by LCM and the fact that its success was not complete.
2. The order about costs made by the primary judge was: 6. Order that the defendant pay two thirds of the plaintiff's costs of the proceedings, such costs not to include the $12,085 paid by the plaintiff in respect of Mr Craddock's attendance to give evidence.
3. As can be seen there were two components of that order.
4. The first component of the order, that the defendant pay two thirds of the plaintiff's costs of the proceedings, was based upon two principal matters: 1. First, LCM had failed to establish that it was entitled to succeed relying on the Wind Down Proposal; 2. Second, "it was not successful in relation to its contention that Mr Coope had decided, well prior to being asked to put the Separation proposal, to enter into a commercial relationship with Vannin in competition with LCM".
5. The second component of the primary judge's costs order was in relation to the costs of Mr Craddock to travel to Sydney from the Isle of Man to give evidence.
6. On 1 May 2015, an application by Mr Coope for Mr Craddock to give evidence via video link was determined by Hammerschlag J. His Honour said that if LCM agreed to pay Mr Craddock's travelling expenses, totalling $12,085, the application would fail but otherwise it would succeed. LCM paid that amount and Mr Craddock gave evidence in person rather than via video link.
7. LCM made an application to the primary judge to be reimbursed the amount of $12,085 it had paid to secure Mr Craddock's attendance. In relation to this application the primary judge said, at [9]: [T]he substance of the cross-examination of Mr Craddock was directed to the issues in respect of which LCM failed. In those circumstances, I do not propose to make any order in respect of the $12,085.

Summons seeking leave to cross-appeal

1. On 29 September 2015, LCM filed a summons seeking leave to cross-appeal. In that summons it sought orders that order 6 set out at paragraph [7] above be quashed and replaced with orders that Mr Coope pay LCM's costs of the trial below and reimburse the $12,085 it had paid to secure Mr Craddock's attendance to give evidence in person.
2. On 27 November 2015, Mr Coope filed a draft notice of contention, arguing that the costs order of the primary judge should be affirmed on the basis that it was open for the primary judge, in the exercise of his discretion to make such a costs order given the overall outcome of the proceedings; it was not necessary to have regard to the specific issues not pressed by LCM.
3. In this Court LCM established that it was entitled to succeed relying on the Wind Down Proposal in addition to the Separation Proposal.
4. Accordingly, as LCM has succeeded in overturning one of the important bases for the primary judge's decision about costs, it is appropriate to grant leave to LCM to cross-appeal, quash order 6 made by the primary judge on 7 August 2015 and exercise the discretion about costs afresh.

Re-exercise of the costs discretion

1. In relation to the costs of the proceedings below, LCM identified two reasons why the primary judge discounted its costs.
2. First, the primary judge did not award all of its party-party costs as LCM's success was "not complete". LCM submitted that as it established its case in relation to the Wind Down Proposal on appeal, its success is now "complete" and the costs recoverable by it should not be discounted by any failure to prove that the Wind Down Proposal provided a basis to conclude that Mr Coope had engaged in serious misconduct.
3. We accept that LCM's entitlement to costs should reflect its success in relation to the Wind Down Proposal.
4. Second, the primary judge did not award LCM all of its costs, in part, because of two issues that LCM raised in its pleadings and subsequently abandoned before the trial. The primary judge found that the appropriate costs order "should reflect the issues not pressed by LCM".
5. The first pleading issue not pressed was a claim made by LCM for repayment of a payment it had made to Mr Coope in lieu of notice. This claim was first made in an Amended Summons filed on 29 May 2015 and abandoned in LCM's Third Further Amended Summons, filed on 22 June 2015. LCM was subject to an order for costs thrown away as a result of the amendments.
6. We accept that, as LCM submitted, it should not be subject to two costs penalties for the same conduct, and therefore it is inappropriate to deny LCM a proportion of its costs of the trial by reason of this claim which was abandoned before trial.
7. The second pleading issue not pressed by LCM was a restraint against competition, originally sought for 12 months and subsequently amended to be for 3 months. The cross-appellant submitted that, given Mr Coope disputed the necessity and reasonableness of the restraint irrespective of its length, there was no reason to differentiate between the two time periods for costs purposes.
8. We accept that, as LCM submitted, in circumstances where Mr Coope maintained a general opposition to the restraint, the evidence required to address this issue would not be materially altered by a change in the length of the restraint.
9. This is not, however, the end of the matter. As Mr Coope submitted, at trial, Senior Counsel then appearing for LCM (but not in this Court), argued that Mr Coope and Mr Craddock sought to come to an agreement to the exclusion of LCM in January 2015. This was described by Mr Clarke SC, who appeared at the trial and in this Court for Mr Coope as "the conspiracy case". Relevantly, LCM's written submissions below framed Mr Coope's breach as follows: The evidence demonstrates that in January and/or February 2015: (a) Coope undertook undisclosed negotiations with Vannin to establish a direct business relationship with Vannin to the exclusion of LCM pursuant to which Coope and Vannin would establish a business in competition with LCM…
10. LCM's attempt to prove this matter occupied a considerable part of the trial. Senior Counsel then appearing for LCM placed significant emphasis on this case in cross-examination and in written and oral address.
11. The primary judge found that there was no basis, on the evidence before him, to conclude that Mr Coope and Mr Craddock were conspiring in January 2015 to establish a business in competition with LCM, saying at [71] - [73]: …Again, Mr Craddock and Mr Coope, independently, gave a similar account of what happened. There was no suggestion in the evidence that they had put their heads together to ensure their evidence was congruent. In those circumstances, I see nothing sinister in the fact that Mr Coope and Mr Craddock met separately from Dr King on this occasion. I see no basis to conclude that they were doing anything other than discussing what possible commercial arrangements could be negotiated between Vannin and LCM, and what salary and equity arrangements might be available to Mr Coope if some mutually satisfactory arrangement could be negotiated between Vannin and LCM. I cannot see a basis to conclude, as [Senior Counsel for LCM] submitted, that Mr Coope "sought to isolate certain discussions with Mr Craddock, to the exclusion of Dr King".
12. There is no reason for this Court to disturb those findings. The cross-appellant raised as an important issue the "conspiracy case" which was determined against it. It plainly took up a good deal of the time at the trial.
13. Finally, so far as the award of costs below is concerned, s 200B of the Corporations Act 2001 (Cth) was raised by LCM at trial as relevant. We accept that Mr Coope should not have to pay costs for an issue that was addressed in detail at trial, where the primary judge found that had he "concluded that Mr Coope was entitled to damages" he would not have accepted LCM's arguments on this issue.
14. In circumstances where LCM spent a significant amount of time before the primary judge unsuccessfully pursuing the "conspiracy case" and presenting arguments on s 200B, it is appropriate that there be an award of costs less than the full amount of its party‑party costs of the trial.
15. As the primary judge correctly noted, it is not possible to achieve mathematical precision in determining the award costs in a case like this. Doing the best we can, having regard to the time taken on this issues upon which LCM failed, we consider it appropriate to order that Mr Coope pay 80 per cent of LCM's costs of the proceedings below.

Mr Craddock's attendance costs

1. LCM submitted that it should not bear the cost of Mr Craddock's attendance in court in Sydney as his evidence went to an issue on which it was ultimately successful, being Mr Coope's engagement in serious misconduct in relation to the Wind Down Proposal.
2. This submission does not take into account, however, the fact that LCM was ordered by Hammerschlag J to pay these costs as the price for securing Mr Craddock's attendance in person rather than by video link.
3. Having considered the content of Mr Craddock's cross-examination in the context of the issues in this case, it seems clear that LCM's desire that Mr Craddock give evidence in person rather than via video link was in order to put the "conspiracy case" to him. In these circumstances, and given breadth of the discretion afforded by s 98 of the Civil Procedure Act 2005 (NSW), we decline to order Mr Coope to reimburse LCM for the costs paid for Mr Craddock's attendance.

Costs of the cross-appeal

1. There is no reason why Mr Coope should not pay the costs of the cross-appeal.

Costs of the appeal

1. Mr Coope submitted that he should be heard in respect of the costs order made following the outcome of the appeal. In order to have properly made that application, Mr Coope needed to file a notice of motion within 14 days of the judgment seeking a variation of the costs order; Uniform Civil Procedure Rules 2005 r 36.16(3A). He did not do this. This is not a case where the principles discussed in Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 apply. In any event, the Court does not consider it would have been appropriate to vary the costs order it made following the appeal.

Conclusion and orders

1. For the foregoing reasons, the Court makes the following orders: 1. Leave to cross-appeal granted. 2. Cross-appeal upheld. 3. Set aside order 6 made by Stevenson J on 7 August 2015 and in lieu thereof order that Mr Coope pay 80 per cent of LCM's costs of the proceedings below, such costs not to include the $12,085 paid by the LCM in respect of Mr Craddock's attendance to give evidence. 4. Mr Coope pay the costs of the cross-appeal as agreed or assessed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 July 2016