Dreamstreet Lending Pty Ltd v Weiss

Federal Court of Australia|2023-07-27|Before: Mr P, Mr J, Button J

Division: General Division

National Practice Area: Commercial and Corporations

Number of paragraphs: 80

Date of hearing 21 July 2023

Counsel for the Applicant: Mr P Wallis KC with Mr J Gray

Solicitor for the Applicant: K&L Gates

Counsel for the First Respondent: The First Respondent is self-represented

Counsel for the Second and Third Respondents: Ms H A Tiplady

Solicitor for the Second and Third Respondents: Tisher Liner FC Law

BETWEEN: DREAMSTREET LENDING PTY LTD Applicant

AND: MOISHE WEISS First Respondent

GREMARC PTY LTD (ACN 134 548 128) Second Respondent

AND BETWEEN: MOISHE WEISS Cross-Claimant

AND: DREAMSTREET LENDING PTY LTD Cross-Respondent

order made by: BUTTON J DATE OF ORDER: 27 July 2023

A confidential version of these orders, containing Confidential Annexure A, is to be sealed and made available only to the parties and their legal representatives. That annexure is confidential as it contains the personal and financial details of certain individuals in respect of whose loans trail commissions are to be paid by the Applicant to the First Respondent.

The First Respondent breached cl 2(c)(i) of his written services agreement with the Applicant dated 13 March 2018 (the Weiss SA) by taking up employment with the business operated by the Second and Third Respondents prior to terminating his consultancy with the Applicant.
The First Respondent breached cll 7(a)(ii), (a)(iv) and (c) of the Weiss SA by making the download of "Person Records" from the Applicant's customer relationship management database on 11 June 2020 (the First Download).
The First Respondent breached cll 7(a)(ii) and 7(c) of the Weiss SA by using some of the customer documents he had obtained through his work with the Applicant to progress loan applications for those customers while employed by the Second and Third Respondents.
The First Respondent did not breach cll 13(a)(ii) and (iii) of the Weiss SA, because each clause, on its proper construction, is unenforceable as an unreasonable restraint of trade.
The First Respondent is entitled to be paid ongoing trail commissions by the Applicant in respect of the principal outstanding on the loans specified in Confidential Annexure A to these orders, and in accordance with orders 7 and 8.

There be judgment for the First Respondent against the Applicant in the amount of $8,961.45 (with no GST applicable), being the amount calculated after setting off the Applicant's entitlements on the claim to nominal damages of $200, its entitlements to claw back commissions and pre-judgment interest, against the First Respondent's entitlements on the cross-claim to unpaid commissions, deductions against payments to the First Respondent and pre-judgment interest.
The Applicant, by the last day of each calendar month, is to pay ongoing trail commission to the First Respondent in respect of each loan specified in Confidential Annexure A to these orders: (a) at the rate set out in Confidential Annexure A to these orders; and (b) calculated in respect of the principal amount owed on the loan on the last day of the previous calendar month.
The Applicant's obligation under paragraph 7 above to pay the First Respondent ongoing trail commission in respect of each loan is to continue until: (a) the loan is paid out or discharged; or (b) the Applicant and the Respondent agree that the Applicant is no longer obliged to pay trail commission in respect of the loan.
The First Respondent be restrained from using any copies of the Applicant's customer-related-documents stored on his computer devices in connection with assessing the ability of any such customer to service any loan, or to apply for loan finance or refinance.
By 3 August 2023, the First Respondent is to: (a) delete any copies of the First Download from his computer devices; and (b) inform the Applicant's solicitors in writing that he has done so, including by identifying all of his computer devices that have at any point contained a copy of the First Download.
By 10 August 2023, the Applicant is to make any request in writing to the First Respondent that the First Respondent make all of his computer devices that have at any point contained a copy of the First Download available to a third-party computer expert identified by the Applicant so as to enable the expert to search the computer devices, and if necessary, forensically delete any copies of the First Download from the computer devices.
By 17 August 2023, the First Respondent is to comply with any request made pursuant to paragraph 11 above by delivering all of his computer devices that have at any point contained a copy of the First Download to the third-party computer expert identified by the Applicant, together with all necessary log-in details and passwords to access the devices, to be provided to the third-party computer expert directly by the First Respondent (to remain confidential between them), so as to enable the expert to search the computer devices, and if necessary, forensically delete any copies of the First Download from the computer devices.
By 31 August 2023, the Applicant is to procure the third-party computer expert to return to the First Respondent any computer devices delivered to the third-party computer expert by the First Respondent pursuant to paragraph 12 above.
The Applicant is to bear the costs of the third-party computer expert referred to in paragraphs 11 to 13 above.
The First Respondent is released from his undertaking given to the Applicant on 13 October 2020, in respect of any copies of the excel spreadsheets downloaded from the Applicant's customer relationship management database on 11 May 2020 (Second and Third Downloads).
The Second Further Amended Originating Application dated 21 March 2023 is otherwise dismissed.
The Amended Notice of Cross-Claim dated 31 March 2023 is otherwise dismissed.
For the purpose of r 2.32(3)(a) of the Federal Court Rules 2011 (Cth), a confidential version of these orders containing Confidential Annexure A is to be sealed and made confidential. Costs
The Applicant pay the Second and Third Respondents' costs until 27 November 2020 on a party and party basis, and thereafter on an indemnity basis, to be taxed if not agreed.
The Applicant and the First Respondent bear their own costs of the Applicant's claim against the First Respondent up to 25 November 2020.
The Applicant pay the First Respondent's costs of the Applicant's claim against the First Respondent (to the extent the First Respondent incurred legal costs and disbursements) on an indemnity basis from 26 November 2020 onwards, to be taxed if not agreed.
The Applicant and the First Respondent bear their own costs of the Applicant's cross-claim up to 15 April 2021.
The Applicant pay the First Respondent's costs of the First Respondent's cross-claim (to the extent the First Respondent incurred legal costs and disbursements) on an indemnity basis from 16 April 2021 onwards, to be taxed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BUTTON J: 1 On 23 June 2023, I handed down my reasons in Dreamstreet Lending Pty Ltd v Weiss (No 2) [2023] FCA 684 (Liability Reasons). These reasons address costs as the parties did not agree on what costs orders should be made. The parties filed submissions as to costs, as well as affidavits, and were content for costs to be determined on the papers. 2 These reasons assume familiarity with the Liability Reasons. As set out in those reasons, Dreamstreet failed to make out its claims against Financepath and succeeded in only some of its claims against Mr Weiss.

Legal Principles 3 The court has a broad discretion as to costs: Federal Court of Australia Act 1976 (Cth) (the FC Act) s 43. This discretion must be exercised judicially: Summers v Repatriation Commission (No 2) [2015] FCAFC 64 at [14] (Kenny, Murphy and Beach JJ). 4 In the ordinary course, costs will follow the event. However, where there is a mixed outcome in proceedings, an unsuccessful party is not automatically entitled to costs in respect of those issues of fact or law on which the successful party failed: Inspector-General in Bankruptcy v Bradshaw (No 2) [2006] FCA 383 at [12] (Kenny J). Justice Mortimer (as her Honour then was) stated in Plaintiff S111A/2018 v Minister for Home Affairs (No 5) [2022] FCA 603 at [42] that "the authorities caution against apportioning the costs of a successful party by some kind of division into the issues on which the party succeeded and those the party did not". 5 Where both sides achieve a substantial measure of success, the just and appropriate order in the circumstances may be that there be no order as to costs so that each party must bear its own costs: AWB Ltd v Cole (No 6) (2006) 235 ALR 307; [2006] FCA 1274 at [16]-[17] (Young J). Alternatively, each side may be ordered to bear its own costs except that one side may get its costs on some issues, if an issue by issue approach will produce a fairer result: Forbes Engineering (Asia) Pte Ltd v Forbes (No 5) [2009] FCA 873 at [10]-[11] (Collier J); Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5] (Finkelstein and Gordon JJ, as her Honour then was). 6 On the question of costs, the court is mindful of the furtherance of the overarching purpose set out in s 37M of the FC Act, and the obligation on parties pursuant to s 37N(1) to act consistently with the overarching purpose. As Black CJ (with whom Branson and Finn JJ agreed) stated in Purvis v Dairy Adjustment Authority (No 2) (2006) 150 FCR 48 at [4]: "The burden of costs is an impediment to access to the courts and it is appropriate for the Court, in the public interest, to discourage the incurring of unnecessary costs". In exercising the discretion to award costs in a civil proceeding, the court must take account of any party, or their lawyer's, failure to comply with the overarching purpose: FC Act s 37N(4). In Stefanovski v Digital Central Australia (Assets) Pty Ltd (No 2) [2018] FCAFC 113 at [14], the Full Court (McKerracher, Robertson and R Derrington JJ) said as follows concerning the potentially far-reaching impact of ss 37M and 37N on the costs that even a successful party may expect: For instance, where a party has been successful in the litigation generally but has failed to comply with the requirements of ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth), they can have no cause for complaint if they are denied an order for costs in their favour. See also Kimber v Owners Strata Plan No 48216 [2018] FCAFC 181 at [86] (Flick, Barker and R Derrington JJ). 7 When performing an overall assessment of costs, the court will also take into account any failure to comply with any pre-litigation genuine steps duties under the Civil Dispute Resolution Act 2011 (Cth) (CDR Act) and whether a person took genuine steps to resolve the dispute: CDR Act s 12. While it is recognised that the parties are entitled to consider their own legal, personal and commercial interests, there must be adherence to the principles and duties in the CDR Act and the FC Act: Damorgold Pty Ltd v Blindware Pty Ltd (No 2) [2018] FCA 364 (Damorgold) at [36] (Middleton J). 8 The relevant principles regarding Calderbank offers are well established. A non-exhaustive list of circumstances that may be relevant in determining whether the rejection of a Calderbank offer was unreasonable was summarised by the Victorian Court of Appeal in Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435 at [25] (Warren CJ, Maxwell P and Harper AJA), and applied by the Full Court in Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [7] (Nicholas, Yates and Beach JJ): (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree's rejecting it. 9 The principles relating to Calderbank offers are also of assistance in considering whether an applicant has unreasonably failed to accept an offer of compromise for the purposes of determining the costs consequences of an offer of compromise pursuant to r 25.14(2) of the Federal Court Rules 2011 (Cth) (the Rules): Singapore Telecom Australia Investments Pty Ltd v Commissioner of Taxation (No 2) [2022] FCA 260 at [28] (Moshinsky J).

Costs of Dreamstreet's case against Financepath 10 All of Dreamstreet's claims against Financepath were dismissed. Dreamstreet contended that it should pay Financepath's costs only on a party and party basis, but that Financepath should pay Dreamstreet's costs of Financepath's summary judgment application, which Dreamstreet says was largely unsuccessful. I will address the costs of the summary judgment application separately below. 11 Financepath sought its costs on an indemnity basis from 15 October 2020 onwards. It relied on its first Calderbank offer in support of that submission (and relied, alternatively, on a number of other offers, referred to below). 12 Dreamstreet contended that it should only pay Financepath's costs on a party and party basis, on the basis that: (a) it was justified in commencing and continuing the proceedings against Financepath; and (b) Financepath's offers ought not result in costs being ordered on an indemnity basis. 13 Financepath made a number of offers, some jointly with Mr Weiss, some without Mr Weiss. Those offers were as follows: (a) a Calderbank offer was made by Financepath on 15 October 2020 (the October 2020 Calderbank); (b) a Calderbank offer was made by Financepath and Mr Weiss on 25 November 2020 (the November 2020 Calderbank); (c) an offer of compromise under r 25.01(1) of the Rules was made by Financepath and Mr Weiss on 25 November 2020 (the Offer of Compromise); (d) a Calderbank offer was made by Financepath and Mr Weiss on 15 April 2021 (the April 2021 Calderbank); (e) a Calderbank offer was made by Financepath on 23 November 2021; and (f) a Calderbank offer was made by Financepath on 10 March 2023. 14 Financepath principally relied on the October 2020 Calderbank. That offer was in the following terms: 1. Dreamstreet withdraws its claim against Mr Attard and Gremarc Pty Ltd with no order as to costs[.] 2. Mr Attard, on behalf of himself and Gremarc Pty Ltd, will execute a declaration in the form provided below in relation to Confidential material belonging to Dreamstreet. 3. Our clients will execute necessary consent orders to ensure that injunctive relief contained in order 1 of those dated 1 October 2020 will continue to apply to our clients despite them no longer being parties to the proceeding. 15 The proffered declaration committed to return Dreamstreet's confidential information, erase all copies of that confidential information and agree not to use any of the confidential information, as well as undertaking not to induce Mr Weiss to breach any contractual obligations he may have to Dreamstreet. Financepath had obtained copies of the confidential information from the independent solicitor (appointed in connection with the ex parte search order executed on Mr Weiss) after giving confidentiality undertakings pursuant to an order of the then docket judge made on 1 October 2020. 16 Financepath submitted as follows in relation to why it should have its costs on an indemnity basis, having regard to Dreamstreet's failure to accept the October 2020 Calderbank: 9. In making this submission, Financepath relies, in particular, on the following matters: (a) The offer was made three weeks after the proceeding had been issued and the search order had been executed. At that time, Dreamstreet's prospects of success as against Financepath were low, and were known by Dreamstreet to be low. In particular: (i) Dreamstreet's counsel told the Court during the ex parte hearing on 24 September 2020 that Dreamstreet was issuing proceedings against Financepath (in which it pleaded a cause of action which required proof of Financepath's knowledge) in circumstances where: ["]We don't even know whether Financepath, as represented by the second and third respondents, even know about what Mr Weiss has done. They might not. But as your Honour will understand, I expect, we still say there's a reason for them to be a party because no matter what, if Mr Weiss has taken this information wrongfully, they shouldn't be allowed to use it". (ii) As a result of the search, which took place on 25 September 2020, Dreamstreet knew that there was only one Listed Item on Mr Weiss' Financepath-issued device (as opposed to Mr Weiss' personal devices). (iii) Dreamstreet knew that certain of the matters it relied upon in its affidavit evidence filed in support of the ex parte search order were false. (iv) Despite Mr Weiss having been employed by Financepath for four months by that time, Dreamstreet had not received any finance discharge forms which showed that any of its customers had refinanced their loans with Financepath. (b) In the offer, Financepath expressly denied involvement in any alleged wrongdoing of Mr Weiss, including stating that it had never seen or used the Downloads (and that position was vindicated at trial). (c) Financepath's offer was clearly stated, and was to the effect that the parties walk away and bear their own costs, and included an offer by Financepath to make a statutory declaration to the effect that it agreed to permanently erase, and not use, any of Dreamstreet's confidential information. (d) The offer was open for 7 days, which was a reasonable period of time for Dreamstreet to consider it and respond. (e) The offer stated that it was made on an open basis, and would be relied upon by Financepath in any future application for costs against Dreamstreet. (f) Financepath has achieved a more successful result in the litigation than that stipulated in the offer. 10. Having regard to the above factors, Dreamstreet's rejection of Financepath's offer was unreasonable, and justifies the making of an indemnity costs order in Financepath's favour from the date of that offer onwards. 17 Dreamstreet resisted the proposition that it should pay Financepath's costs on an indemnity basis from 15 October 2020 (or by reference to the other offers made in 2020) on the following basis: 15. The First Financepath Calderbank [the October 2020 Calderbank]: (a) was open for acceptance for only seven days (until 22 October 2020); (b) was made approximately 5 business days after Mr Geri (then) of KPMG provided his final analysis of the computer images obtained from Mr Weiss' devices pursuant to the Search Order. Dreamstreet had only been provided with copies of the approximately 2000 seized documents on 2 October 2020. It was not given adequate time to review Mr Geri's complete analysis and the seized documents prior to the offer lapsing; and (c) was made in circumstances where Financepath continued to finalise the settlement of CL and YL's loan, justifying this by reference to a construction of the Weiss SA rejected at trial. 16. Each of the First Financepath Calderbank, the First Joint Calderbank and Joint Offer of Compromise (the 2020 Offers): (a) were made prior to the parties exchanging evidence or pleadings; and (b) were made prior to Financepath directing CB and TC back to Dreamstreet. 17. Dreamstreet was not in a position to assess the appropriateness of each 2020 Offer at the time they were made due to the limited information available from which it could consider the strength of the Respondents' position. The difficulty of assessing the offers was heightened by the fact that, at the time of each offer, the Respondents continued to progress Dreamstreet customer loan applications, and did not take steps to identify and/or delete Dreamstreet confidential information in their possession. 18 The October 2020 Calderbank was a "walk away" offer. In my view, while it ought to have been aware at the time that offer was made that its case against Financepath was speculative, it was not unreasonable for Dreamstreet not to accept the October 2020 Calderbank. That offer was made at a very early stage in the proceeding, and was only open for acceptance for seven days. As Dreamstreet noted in its submission, at the time the offer was made and was open for acceptance, it had had only a limited opportunity to review and consider the expert report obtained from Mr Geri. It was not unreasonable for Dreamstreet to reject the offer to walk away on the basis that it would still have been reasonably assessing its case against Financepath, having regard to the recently-received expert report. 19 The next two offers relied on by Financepath were made jointly with Mr Weiss: the November 2020 Calderbank and the Offer of Compromise. 20 The Offer of Compromise was made in the following terms: The Respondents offer to compromise this proceeding. The offer is $25,000. The amount of the offer in respect of the claim inclusive of interest is $25,000. This offer is inclusive of costs. This offer of compromise is open to be accepted for 14 days after service of this offer of compromise. The amount of the offer will be paid within 28 days after acceptance of this offer. This offer is made without prejudice. 21 That offer was made under r 25.01, and was in accordance with Form 45. The Offer of Compromise accorded with r 25.03 as it stated whether the offer was inclusive of costs. Rule 25.03(2) permits (but does not require) that an offer separately specify the amount that represents the offer in respect to the claim and interest (if any). 22 Rules 25.14(1)-(2) specify the costs consequences where an offer of compromise is not accepted: (1) If an offer is made by a respondent and not accepted by an applicant, and the applicant obtains a judgment that is less favourable than the terms of the offer: (a) the applicant is not entitled to any costs after 11.00 am on the second business day after the offer was served; and (b) the respondent is entitled to an order that the applicant pay the respondent's costs after that time on an indemnity basis. (2) If an offer is made by a respondent and an applicant unreasonably fails to accept the offer and the applicant's proceeding is dismissed, the respondent is entitled to an order that the applicant pay the respondent's costs: (a) before 11.00 am on the second business day after the offer was served - on a party and party basis; and (b) after the time mentioned in paragraph (a) - on an indemnity basis. 23 The analysis of offers of compromise made by multiple respondents was considered by R Derrington J in Wyzenbeek v Australasian Marine Imports Pty Ltd (No 3) [2019] FCA 439 (Wyzenbeek). In that case, R Derrington J considered whether it was reasonable for the applicants to reject an offer made by the respondents jointly, where the applicants succeeded against only one respondent. In respect of the respondents against whom the applicants failed, his Honour considered the application of r 25.14(2): Wyzenbeek at [57]. His Honour considered (at [59] and [62]) that, having regard to the quantum of the offer, and other matters, it was not possible to be satisfied that the judgment obtained was less favourable than the offer, so as to engage r 25.14(1). On the facts of that case, it was not unreasonable for the applicants to reject the offer of compromise made by all the respondents as doing so would have deprived it of the ability of obtain the relief, which it ultimately did obtain, against one of the respondents: Wyzenbeek at [64]. 24 In this case, I consider that the costs consequences of the Offer of Compromise, as between Dreamstreet and Financepath, cannot be determined under r 25.14(1). The ultimate balance of the quantum (as between Mr Weiss and Financepath) favours Mr Weiss, and I have concluded that Dreamstreet ought not have any costs order as against it and Mr Weiss. Accordingly, the judgment obtained by Dreamstreet was less favourable than the Offer of Compromise. However, I nevertheless do not consider that r 25.14(1) applies. Where that rule is applied, the maker of the offer obtains an indemnity costs order from two business days after the offer, but will ordinarily still be liable for the applicant's costs until that point: r 25.14(1)(a), reflecting the fact that r 25.14(1) only applies where the applicant has obtained judgment against the maker of the offer. Absent an effective offer, Financepath would not be exposed to a costs order in favour of Dreamstreet for any period of the proceeding. As such, in my view either r 25.14(1) is inapplicable to the present circumstances, or should not be applied (in exercise of the court's broad discretion and pursuant to r 1.35). 25 However, I see no reason why r 25.14(2) cannot apply to determine the costs position between Dreamstreet and Financepath on the basis that its proceeding against Financepath has been dismissed, provided that the question of whether it was unreasonable for Dreamstreet not to accept the offer is assessed taking into account that acceptance would have required it to settle its claims against Mr Weiss, as well as its claims against Financepath. In my view, it was unreasonable for Dreamstreet to fail to accept the Offer of Compromise, notwithstanding that the Offer of Compromise would have required Dreamstreet to compromise its claims against Mr Weiss, against whom it ultimately obtained some (albeit limited) success. 26 By 25 November 2020, Dreamstreet's proceeding had been on foot for two months, and it had had a reasonable opportunity to consider and digest Mr Geri's report. While the Offer of Compromise was a purely financial offer, and was a global offer which also required it to relinquish its claims against Mr Weiss, by that time Dreamstreet already had the benefit of the broad confidentiality undertaking given by Mr Weiss on 13 October 2020. While the undertaking appears to have been given by Mr Weiss (along with Financepath and the lawyers involved) in connection with obtaining documents pursuant to orders made on 1 October 2020, Dreamstreet did not suggest Mr Weiss's undertaking was not effective according to its terms, by virtue of the circumstances in which it was given. 27 The undertaking extended to certain hardcopy documents, electronic copies of certain listed things, and a Dreamstreet Client List, as defined in the undertaking, and the information in those documents. Relevantly, Mr Weiss undertook to keep confidential "the electronic copies of Listed Things, as defined in the Independent Computer Expert's Report dated 30 September 2020" and the information therein. It was not suggested by Dreamstreet that the undertaking did not cover all of the confidential information that was the subject matter of the proceeding. 28 The significance of the undertaking is that, to the extent that Dreamstreet's proceeding was directed at protecting what it considered to be its confidential information, and preventing its use by Mr Weiss, that objective was amply secured by Mr Weiss's undertaking. To the extent the concern attached to Financepath, it also gave similar undertakings. There was no cause to pursue the litigation to protect the confidential information as the undertakings were wide in their terms, and not limited in duration. 29 Dreamstreet's proceeding was also directed at restraining Mr Weiss and, through him, Financepath, from having dealings with Dreamstreet's clients. However, given the ambit of the restraint clauses, it should have been obvious to Dreamstreet from the outset that its prospects of enforcing the restraints were very poor, having regard to established case law. 30 For these reasons, the fact that accepting the Offer of Compromise would have required Dreamstreet to relinquish its claim against Mr Weiss does not mean that it was reasonable for it not to accept the offer (cf Wyzenbeek). 31 While Dreamstreet submitted that it was not unreasonable for it to refuse this offer on the basis that, at the time the Offer of Compromise was made, customers CB and TC had not yet been referred back to Dreamstreet, that is not to the point. As noted, Dreamstreet's prospects of enforcing the restraints were always objectively poor based on the state of the law. 32 It should also have been clear to Dreamstreet that the quantum of any loss or damage it might pursue was likely to be very limited. As Financepath noted in its submissions at trial and in relation to costs, the launch of the litigation by Dreamstreet was fuelled by suspicions. Those suspicions were, at least in part, lacking in any reasonable foundation insofar as Dreamstreet launched the proceedings when it did not have any proper foundation to think that customers who were refinancing away from Dreamstreet were refinancing with Financepath. 33 The part of the litigation that was not speculative related to Mr Weiss having downloaded data from the CRM and, following Mr Geri's analysis, having possession of many customer-related documents. But, again, by 25 November 2020, Dreamstreet's position was protected by the confidentiality undertaking given by Mr Weiss on 13 October 2020 (as well as the undertakings given by Financepath in addition to its Harman obligations). Given the substantive matters being pursued by the litigation at that stage - enforcement of the restraints and protection of confidential information - the fact that pleadings and evidence had not been exchanged does not mean that it was reasonable for Dreamstreet to fail to accept the Offer of Compromise. 34 Pursuant to r 25.14(2), I will order that Dreamstreet pay Financepath's costs until 27 November 2020 on a party and party basis, and thereafter on an indemnity basis. 35 If, however, r 25.14(2) cannot be applied to the Offer of Compromise on the basis that Dreamstreet's proceeding did not wholly fail against Mr Weiss (which is not a contention Dreamstreet has advanced in its submissions), in my view it was unreasonable for Dreamstreet not to accept the November 2020 Calderbank, for the same reasons, as well as the reasons outlined in relation to that offer below in connection with the costs position between Dreamstreet and Mr Weiss. The terms of the November 2020 Calderbank are set out below in the analysis concerning Mr Weiss.

Financepath's summary judgment application against Dreamstreet 36 Dreamstreet submitted that Financepath should pay its cost of Financepath's summary judgment application on the basis that the application was largely unsuccessful. 37 Dreamstreet's submission overlooks that the judge who heard and determined that application ordered that the cost of Financepath's interlocutory application be costs in the proceeding; the judge did not reserve the cost of that interlocutory application (cf where costs are reserved and r 40.03 of the Rules anticipates that a further order may be made): Dreamstreet Lending Pty Ltd v Weiss [2022] FCA 1179. The judge addressed the costs order in his reasons, explaining (at [60]) that: Financepath has obtained some degree of success, because the vicarious liability claim was conceded to be defective. In my view, the appropriate order as to costs is that the costs of the application be costs in the proceeding, because the question of who bears them should depend on the ultimate outcome. 38 The ultimate outcome was that Financepath was successful in defending the claims brought against it by Dreamstreet. There is no reason to disturb the costs order made by the judge who heard and determined the summary judgment application.

Whether Dreamstreet should have an order that Mr Weiss pay 50% of its costs 39 Dreamstreet has sought an order that Mr Weiss pay 50% of Dreamstreet's costs of its claim against Mr Weiss. Dreamstreet's submission that the costs order should so provide was based, in substance, on its contention that it was primarily the successful party, and its entitlement to a costs order ought not be determined on the basis that it recovered only very limited financial relief. 40 In my view, it would not be an appropriate exercise of the court's wide discretion in relation to costs to make an order of the kind sought by Dreamstreet. That is for the following reasons, in summary: (a) contrary to Dreamstreet's submission, it was not the primarily successful party; and (b) Dreamstreet's pursuit of the litigation and costs incurred was disproportionate to what was at stake, and it would be manifestly unjust that Mr Weiss be subject to a costs order of (likely) hundreds of thousands of dollars in those circumstances. 41 The issues on which Dreamstreet succeeded, as against Mr Weiss, are (with one exception) properly to be characterised as the more minor issues arising on the trial. Significantly, Dreamstreet was only awarded nominal damages in respect of the handful of contractual breach allegations on which it succeeded. Dreamstreet failed on almost all the issues of substantial significance to the trial, in particular its copyright claims, its attempt to enforce the restraint of trade clauses and its breach of contract case on the Second and Third Downloads. The only issue of any significance on which Dreamstreet succeeded was in its breach of contract case on the First Download. 42 While Dreamstreet succeeded in its clawback claims in relation to two clients, it did not succeed on the anterior construction arguments, pursuant to which it claimed clawback in respect of a much more extensive group of loans. Other than in respect of the construction arguments (on which Dreamstreet failed), the clawback claims occupied very little court time. Nor was Dreamstreet's evidence on the clawback claims extensive. Success on only two out of eight loans in respect of which clawback was sought does not justify a favourable costs order in the circumstances. 43 I do not consider that Dreamstreet's success in establishing a breach of contract by Mr Weiss in using a handful of confidential documents to pursue loans constitutes victory on a front that is significant when it comes to the assessment of costs. That issue occupied little court time, and was not the subject of any real opposition by Mr Weiss. 44 I also do not consider that Dreamstreet obtaining declaratory relief in respect of Mr Weiss's breach of the exclusive service obligations is a significant victory. Dreamstreet did not suffer any loss caused by this breach; it did not even seek nominal damages in respect of this breach. The fact that Mr Weiss was employed by Financepath (but in training) for 11 days before his role with Dreamstreet ended occupied little court time. Obtaining declaratory relief for an obvious, but wholly immaterial, breach does not weigh in the balance of obtaining a favourable costs order, to any extent. On the contrary, the pursuit of the allegation at all is hard to understand. 45 Mr Weiss also brought a cross-claim, and enjoyed only limited success. While Dreamstreet did admit it was indebted to Mr Weiss in respect of the claimed upfront commissions, and some of Mr Weiss's original trail commission claims, it did not offer to pay those sums to Mr Weiss: rather, it held out a claimed contractual right to set off sums it owed Mr Weiss against its claims against him. I rejected Dreamstreet's contract-based set-off claims based on both the contract, and the fact that Dreamstreet did not ultimately pursue them at trial. The final calculations arrived at show, in any event, that it is Dreamstreet that suffers the net judgment debt in favour of Mr Weiss, and not vice versa. 46 For these reasons, I do not accept that Dreamstreet can be characterised as the substantial "victor" in the case. It had success on a few claims, only one of which (the First Download) may be considered a substantial issue. That remains the case notwithstanding that I have already indicated (perhaps beneficially to Dreamstreet) a willingness to grant declaratory relief in respect of all contractual breaches (and not just in respect of matters concerning the First Download). Nor does the grant of injunctive relief against Mr Weiss have material significance in relation to costs as the evidence adduced by the parties on costs shows that Mr Weiss executed a confidentiality undertaking in favour of Dreamstreet on 13 October 2020, which was (if anything) more extensive in its terms than the injunctive relief to be granted in favour of Dreamstreet in respect of his use of the customer-related documentation Mr Weiss retained from his Dreamstreet days. That undertaking, which was unlimited in its duration, also extended to the First Download. 47 While I accept that Dreamstreet's "success" is not to be assessed solely by reference to the damages awarded, for the foregoing reasons, I do not agree with Dreamstreet's submission that it should be regarded (vis-à-vis Mr Weiss) as the "primarily successful party" in relation to its claims against Mr Weiss. 48 Dreamstreet was represented by a firm of solicitors, and senior counsel throughout, and with junior counsel from at least before the commencement of the trial (it is not clear when junior counsel was first retained). Mr Weiss was represented by solicitors for a short period initially, but has represented himself, while obtaining some ad hoc advice on specific matters from solicitors at some points, without those solicitors going on the record or appearing for him. Dreamstreet's legal costs (on its affidavit material) were nearly $350,000 by December 2021. No doubt it has incurred very substantial costs since then (noting that the trial did not commence until March 2023). 49 In my view, an award of costs requiring Mr Weiss to pay 50% of Dreamstreet's costs would be grossly disproportionate to the level of success that Dreamstreet enjoyed. Subject to consideration of the offers made by Financepath and Mr Weiss (addressed below), I consider it an appropriate exercise of the court's discretion to order that Dreamstreet and Mr Weiss each bear their own costs of Dreamstreet's claims against Mr Weiss. 50 In addition to the very limited success enjoyed by Dreamstreet, the manner of its initiation and pursuit of this litigation against Mr Weiss over nearly three years is troubling in some respects, and was also disproportionate to what was at stake. As I set out in the Liability Reasons (and although I was not the judge who heard Dreamstreet's initial ex parte application), the lack of candour in the evidence on which that application was advanced is deeply troubling. As also referred to in the Liability Reasons, Dreamstreet effectively abandoned parts of its claim in the running, making no submissions on those parts. 51 Moreover, as noted above, by 13 October 2020, Dreamstreet's interests (so far as they concerned the protection of what it considered was its confidential information) were protected by the undertaking given by Mr Weiss, which was not limited in its duration. It was obvious, and conceded by counsel for Dreamstreet even before the trial commenced, that the case involved (at best) only very modest damages. In short, Dreamstreet has used a sledgehammer to crack a nut and I am not prepared to order that Mr Weiss pay what is likely to be a costs burden of hundreds of thousands of dollars because Dreamstreet ultimately enjoyed some very modest success, and mostly in respect of issues not seriously contested by Mr Weiss. 52 In addition, I consider that it is open to the court, in exercise of its discretion, to take into account the extent to which Dreamstreet took any steps to resolve the issues on which it ultimately succeeded against Mr Weiss, without three years of litigation. Section 3 of the CDR Act states that the object of that Act is "to ensure that, as far as possible, people take genuine steps to resolve disputes before certain civil proceedings are instituted". Section 4 sets out examples of steps that may be taken, and which may then constitute a "a sincere and genuine attempt to resolve the dispute, having regard to the person's circumstances and the nature and circumstances of the dispute". Section 6(2)(b) recognises that steps to try to resolve the issues in dispute may not be taken before proceedings are commenced due to the urgency of proceedings, and ss 11 and 12 provide that an eligible court (of which this court is one) may, in performing functions or exercising powers in relation to civil proceedings before it and in exercising the discretion to award costs, take into account whether a genuine steps statement was filed, and whether a person in fact took genuine steps to resolve the dispute. Similarly, compliance by a party with its obligations pursuant to s 37M of the FC Act is a relevant matter to be considered in relation to costs. While Dreamstreet is entitled to consider its own legal, personal and commercial interests, this must not come at the expense of adherence to the principles and duties in the CDR Act and the FC Act: Damorgold at [36] (Middleton J). 53 To the extent Dreamstreet succeeded on a sub-set of the clawback claims (which were claims enforcing a contractual right to clawback of some commissions), the significance of that victory when it comes to assessing costs is undermined by the absence of any evidence that Dreamstreet has ever made any demand of Mr Weiss in relation to clawback on the loans of MG and DC and JC. For example, there is no evidence of Dreamstreet having simply written to Mr Weiss and explained that, in view of the termination of the loans of those customers, it had been required to repay commissions to the lender and was, consequently, enforcing its contractual right to claw back commissions from Mr Weiss. Mr Weiss's contractual obligation to pay clawback only arose when a demand was made. But there was no evidence of any demand having been made before the clawback claims were advanced by way of the initial Statement of Claim, and then expanded in the Amended Statement of Claim. 54 Similarly, the significance of success on the First Download, so far as costs are concerned, is to be assessed in light of the fact that Dreamstreet never asked Mr Weiss to produce any devices containing copies of the First Download, and to delete them, or to give Dreamstreet access to such devices to have an expert delete the First Download. 55 Dreamstreet has not sought to explain why these steps were never taken, or why the far-reaching undertaking given by Mr Weiss just over two weeks after the proceedings were commenced, was inadequate and it needed to pursue this broad-ranging proceeding over the ensuing years in order to protect its confidential information. 56 Insofar as the pursuit of Dreamstreet's clients is concerned, as already noted, the prospects of enforcing the restraints were always poor (given their drafting), and, in any event, once CB and TC had been referred back to Dreamstreet in December 2020, Financepath and Mr Weiss had been "scared off". Moreover, Dreamstreet deleted or otherwise did not pursue at trial the majority of its earlier allegations about the customers it contended Mr Weiss had been in contact with, in breach of the restraints (as set out in the confidential annexure to the Statement of Claim, as amended). 57 The costs and extent of the litigation pursued were grossly disproportionate to what was at stake. 58 It may be that the litigation was pursued to recoup sunk legal costs, notwithstanding that the continued pursuit of the costs only dug a deeper hole and made the proceeding harder to settle, and to send a message to Mr Weiss (and Financepath, as a competitor of Dreamstreet). Nevertheless, as I have concluded that there should be no costs order in Dreamstreet's favour on its claim for other reasons, it is not necessary to reach a concluded view on whether Dreamstreet pursued its claims against Mr Weiss for these reasons (rather than by reason of a genuine, if overly optimistic, belief in the merits of, and necessity for, its continued litigation). 59 Subject to consideration of the impact of offers made by Mr Weiss, in my view Dreamstreet should not have an order that Mr Weiss pay 50% of its costs of the claim against him, but that Dreamstreet and Mr Weiss should bear their own costs.

Offers made by Mr Weiss 60 I have considered whether r 25.14 applies having regard to the Offer of Compromise. Rule 25.14(1) does not apply as the final relief Dreamstreet obtained in relation to Mr Weiss includes non-financial relief and addresses matters concerning the First Download. As such, it cannot be said that the judgment obtained is necessarily "less favourable" than the terms of the offer. Nor was the proceeding against Mr Weiss dismissed in its entirety, meaning that r 25.14(2) is also inapplicable. However, in my view, the November 2020 Calderbank was effective and has the consequence that Mr Weiss should have a costs order in his favour following the service of that offer (albeit the practical consequence of such an order is likely to be limited given Mr Weiss was self-represented from November 2020 onwards). 61 The November 2020 Calderbank was made jointly by Financepath and Mr Weiss, and offered to settle the proceeding on the following key terms: (a) the respondents would pay $25,000 to Dreamstreet within 28 days of acceptance of the offer; (b) Mr Weiss would release Dreamstreet from payment of his outstanding commissions (said to amount to $55,000); (c) Financepath would engage KPMG, at its own costs, to destroy confidential information in the respondents' possession; (d) there would be restrictions on the released parties (Financepath and Mr Weiss) until 11 September 2022, with a carve out for a number of listed clients; (e) common releases, non-disparagement and confidentiality terms and no admission of liability; and (f) the proceeding be dismissed, with no order as to costs. 62 The offer was open until 5.00 pm on 9 December 2020, a period of two weeks. That was a reasonable period for Dreamstreet to consider the offer. 63 At the time the November 2020 Calderbank was made, Mr Weiss had not put on his cross-claim. That was only filed on 24 February 2021, although it appears from the November 2020 Calderbank that Mr Weiss had foreshadowed his commission claims by then. 64 The November 2020 Calderbank included a draft of the foreshadowed settlement deed. That draft sheds further light on the offer insofar as it made reference to a list of customers the subject of the "carve out". As the draft deed sets out in more detail, the offer was to have restrictions imposed on Financepath and Mr Weiss in respect of one list of clients, while allowing them to proceed with the refinance of another list of clients. 65 In my view, it was unreasonable for Dreamstreet not to accept this offer, for substantially the same reasons as have been set out above in relation to the Offer of Compromise and r 25.14(2) above in relation to Financepath. While the November 2020 Calderbank permitted Mr Weiss and Financepath to deal with a number of clients, the existence of a restraint in respect of some other clients should have been seen as an advantage to Dreamstreet when (as already noted) its prospects of enforcing the restraints should have been recognised as poor from the outset. Consequentially, any expectation of financial recovery of damages from breach of the restraints should have been seen as poor. As the November 2020 Calderbank letter pointed out, the maximum likely damages were less than the amount offered, and the offer also included a release from Mr Weiss's foreshadowed commission claims. 66 The offer should also have been recognised by Dreamstreet as advantageous insofar as it offered to have KPMG, at Financepath's cost, arrange the destruction of all confidential information in the possession of all the respondents (ie including Mr Weiss). Given the poor drafting of the Weiss SA (addressed in the Liability Reasons), it should have been obvious to Dreamstreet from an early point that its claims in relation to confidential information faced real challenges. 67 The offer made would, if accepted, have resulted in the early termination of this litigation on terms significantly more favourable to Dreamstreet than it ultimately secured. It was unreasonable for Dreamstreet not to accept it. 68 When regard is had to the failure to accept the November 2020 Calderbank, in my view the appropriate costs order is that: (a) Dreamstreet and Mr Weiss bear their own costs of Dreamstreet's claim against Mr Weiss up to 25 November 2020 (being the date the Calderbank offer was made); and (b) Dreamstreet pay Mr Weiss's costs (to the extent he incurred legal costs and disbursements) from 26 November 2020 onwards on an indemnity basis, to be taxed if not agreed.

Mr Weiss's cross-claim against Dreamstreet 69 Dreamstreet submitted that Mr Weiss should be ordered to pay it 50% of its costs of Mr Weiss's cross-claim. 70 Mr Weiss submitted that there should be a party and party costs order in his favour in respect of the proceeding generally to 25 November 2020 (alternatively 15 April 2021), and indemnity costs thereafter. 71 As noted above, the November 2020 Calderbank Offer was made before Mr Weiss had commenced his cross-claim. The only offer made after that time, to which he was a party, was the April 2021 Calderbank. 72 The April 2021 Calderbank offer was made with Financepath and offered to settle the claim and the cross-claim on the following principal terms: (a) the respondent pay Dreamstreet a sum of $50,000, paid in six equal monthly instalments; (b) Mr Weiss would release Dreamstreet from claims advanced in his statement of cross-claim; (c) Financepath would, at its cost, destroy any works in respect of which Dreamstreet claimed copyright and/or documents in the respondents' possession containing information about clients collected or prepared by Mr Weiss during the time he provided services to Dreamstreet; (d) there would be restrictions on the released parties up to 11 June 2022 with a carve out for certain named clients; (e) a release by Dreamstreet; (f) non-disparagement and confidentiality terms and no admission of liability; and (g) the proceeding be dismissed, with no order as to costs. 73 Dreamstreet's principal reason (as stated in its submissions) why it was reasonable not to accept this offer was that it had already, by April 2021, incurred $188,421.87 in legal costs, which sum outweighed the sum offered ($50,000). Dreamstreet also submitted that the offer did not extend to Mr Weiss agreeing to delete or destroy Dreamstreet's confidential information. 74 While the offer required the parties to bear their own costs, the significance of Dreamstreet's costs to date must be considered in light of the fact that some substantial portion (quite what amount is not clear) was incurred in its peremptory launch of the proceedings on speculative grounds (as already noted above and in the Liability Reasons), the fact that Dreamstreet's costs must have included wasted costs given the extent of the claims that it made, but did not pursue (both by deleting previously pleaded claims, and simply not prosecuting some other claims at trial), and the fact that its claims of enforcing the restraints were objectively poor. I have already addressed the bases on which I consider it should have been clear to Dreamstreet from an early point (significantly before April 2021) that it had no real prospect of any substantial financial recovery, and its interest in protecting confidential information was already substantially secured by Mr Weiss's undertaking. 75 Further and in any event, the April 2021 Calderbank was not limited to destruction of confidential information by Financepath. Rather, the offer extended to Financepath bearing the cost of destroying documents containing relevant information that were in the "Respondents'" (plural) possession. As the offer was made jointly with Mr Weiss, in my view it clearly involved Mr Weiss agreeing to that occurring. 76 In these circumstances, it was not reasonable for Dreamstreet not to accept the offer on the basis that it had incurred legal costs exceeding the quantum of the offer. The alternative was, as noted above, to continue digging an ever deeper hole by incurring more and more costs in pursuit of very limited realistic potential returns. 77 Accordingly, and having regard to the mixed success on the cross-claim and the April 2021 Calderbank, in my view the appropriate costs order is that: (a) Dreamstreet and Mr Weiss bear their own costs of Mr Weiss's cross-claim against Dreamstreet up to 15 April 2021 (being the date of the Calderbank offer); and (b) Dreamstreet pay Mr Weiss's costs of the cross-claim (to the extent he incurred legal costs and disbursements) from 16 April 2021 onwards on an indemnity basis, to be taxed if not agreed.

Final orders 78 On 23 June 2023, I ordered that the parties confer and provide any agreed or proposed minutes of orders giving effect to the Liability Reasons. Each of Dreamstreet, Mr Weiss, and Financepath provided to the court proposed orders. I brought the matter on for a hearing on 21 July 2023 to determine the final orders in this proceeding. 79 Prior to the hearing, Dreamstreet and Mr Weiss provided competing proposed orders. Both of them proposed to set off sums owed by Dreamstreet to Mr Weiss, and sums owed by Mr Weiss to Dreamstreet, including pre-judgment interest. However, they each conducted the calculations on different bases, and arrived at different figures. Once Dreamstreet added in trail commissions in relation to a loan that had been omitted from their initial calculations, the difference narrowed to the point that Dreamstreet accepted Mr Weiss's calculations. Accordingly, the court has not verified the parties' calculations. Mr Weiss was content to proceed with his proposed net judgment sum of $8,961.45 (in Mr Weiss's favour), although some matters concerning the calculation of pre-judgment interest were brought to his attention by the court. Neither side contended that the sums ought to be grossed-up for GST. 80 I also raised a number of other matters with the parties, including the payment of future trail commissions and a limited release of Mr Weiss's October 2020 undertaking. These matters are, together with other relief foreshadowed in the Liability Reasons, reflected in the final orders made in this proceeding. I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Button.

Federal Court Rules 2011(Cth)rr 25.01, 25.03, 25.14, 40.03

Civil Dispute Resolution Act 2011(Cth)ss 3, 4, 6, 7, 11, 12

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