These reasons relate to the form of final relief to be granted and costs orders to be made consequent upon the delivery of judgment in this matter on 10 August 2015: Ezystay Systems Pty Ltd v Link 2 Pty Ltd [2015] NSWSC 1105. That judgment should be read with these reasons.
The plaintiffs succeeded in their claims against the defendants (J [78]-[95]) but for the claim in respect of Trade Dress (J [246]). The parties were unable to reach agreement on the form of final orders and on 7 September 2015 consent orders were made for the filing of the proposed form of orders by 18 September 2015; the filing and service of any evidence by 9 October 2015; the filing and service of written submissions by 16 October 2015; and the listing of the matter for further hearing on 21 October 2015. Although there was some delay in compliance with some of those orders, the further hearing proceeded on 21 October 2015 when Mr JC Kelly SC appeared for the plaintiffs and Mr JE Lazarus, leading Mr SJ Lipp, of counsel, appeared for the defendants.
Issues
The first issue relates to the terms of the injunction as sought in prayer 1 of the Second Further Amended Statement of Claim filed on 6 May 2015. There is no issue between the parties that an injunction should be granted prohibiting the defendants from directly or indirectly using and/or copying the plaintiffs' Business Manual, Elevator Take, Systems Manual and Software Manual and any copy thereof or document derived therefrom including without limitation the "Books, Records, Materials and Documentation" listed in a document identified as Schedule A to the pleading. The parties are at issue in respect of the definition of "Software" and whether the use of the Software should be restrained by the injunction.
The second issue is whether orders should be made for delivery up of the plaintiffs' documents and/or the deletion of the plaintiffs' electronic files retained by the defendants and whether that process should be supervised.
The final issue between the parties is the question of costs. The plaintiffs seek indemnity costs of the proceedings. The defendants contend that there should be no order for indemnity costs and that the plaintiffs' costs should be reduced by a particular percentage, having regard to various matters referred to below.
Evidence
At the further hearing on 21 October 2015 the plaintiffs relied upon three affidavits of their solicitor, Michael Garvin, sworn on 9 October 2015, 15 October 2015 and 21 October 2015. Mr Garvin was not cross-examined.
Mr Garvin's first affidavit recounted some of the history of the proceedings and in particular annexed the report of Thomas Howard, the independent solicitor, who attended upon the defendants when the search order referred to in the Judgment (J [75]-[77]) was executed on 23 July 2013. Also present at the search were the independent computer experts, Mr Ghorbani and Mr Solomon of Klein & Co. Mr Howard's report refers to the procedures that were adopted and the discussions that were held at the time of the search. There were three computers in the boot of a car that were seized for the purpose of the taking of images at the offices of Klein & Co. There were six email accounts identified for which the passwords were provided to Mr Howard. Additional email accounts were subsequently identified by the independent computer experts and the passwords to those accounts were also supplied.
Mr Garvin's first affidavit also referred to the application to set aside the search order and the proposed (and later abandoned) appeal against the order dismissing that application. He also referred to some settlement offers.
Mr Garvin's second affidavit annexed the report of Klein & Co dated 25 July 2013. That report listed three computers: (1) an HP Laptop (K473101A) located in the boot of a vehicle; (2) an Apple MacBook (K473104A) also located in the boot of the vehicle; and (3) an Apple iMac (K473105A) also located in the boot of the vehicle, each of which was imaged at the offices of Klein & Co. The report also listed five USB storage devices and eight email accounts, six from which data had been acquired at the date of the report.
Mr Garvin's third affidavit responds to the affidavits relied upon by the defendants and I will refer to it later.
The defendants relied upon the affidavits of Mr Riches affirmed on 12 October 2015 and 19 October 2015. They also relied upon the affidavits of their solicitor, David Rydon, affirmed on 13 October 2015 and 19 October 2015. Neither Mr Riches nor Mr Rydon were cross-examined
Mr Rydon's affidavits dealt with the communications between the parties in respect of settlement and the contention that the plaintiffs abandoned their claim for damages and/or an account of profits during the trial. Mr Rydon also gave evidence of his assessment of the time taken in the proceedings in respect of the plaintiffs' unsuccessful Trade Dress claim.
The more controversial evidence is that contained in Mr Riches' affidavit evidence. At this point it is appropriate to refer back to some of the history of the proceedings.
There is an issue between the parties in respect of whether the plaintiffs' claim (referred to as the "retention claim") was only introduced in the Further Amended Statement of Claim (FASOC) filed on 30 April 2015. The defendants contended that it was only in this pleading that the retention claim was made for the first time. It was contended that prior to this pleading there was no claim that the defendants had breached any obligations by retaining the plaintiffs' documents that were not confidential; rather the only retention claim was in respect of the plaintiffs' documents containing confidential information. I am not satisfied that this is correct. Although the FASOC included amendments extending what was originally within the pleading it is clear that the plaintiffs had claimed that the Business Manual, the Elevator Take, the Systems Manual, the Software and the Software Manual were "Books, Records, Material and Documentation" within the meaning of the Deed to which the "Property Return Covenant applied" (see pars [31], [42] and [49] of the FASOC). It is also clear that the plaintiffs had alleged that the defendants had breached the Property Return Covenant in that they had refused to return the documents in accordance with their obligations under the Deed (see pars 56e, 57c, 58e and 60e of the FASOC).
In any event, the defendants contended that once the pleading was amended, an admission was made that the documents had been retained albeit "inadvertently" (J [96]). The defendants also relied upon the Undertaking that was proffered to the Court on 30 April 2015 that became an Exhibit (Ex B) (J [96]). The defendants undertook to the Court, without admission, that: (1) they would delete any and all electronic copies of the documents referred to in Schedule A within 21 days of 30 April 2015; (2) (without admission that the documents existed) they would return any hard copies of any of the documents referred to in Schedule A within 21 days of 30 April 2015; (3) (without admission that any such copies existed) they would delete any copies of the plaintiffs' Confidential Information and Books, Records, Materials and Documentation (as defined in the Deed) within 21 days of 30 April 2015; (4) (without admission that any such copies existed) they would return any hard copies of the Group's Confidential Information and Books, Records, Materials and Documentation within 21 days of 30 April 2015; and (5) within 24 days of 30 April 2015 they would confirm in writing by their solicitor to the solicitor for the plaintiffs that they had complied with undertakings (1) to (4). The Undertaking included the condition that the solicitor and counsel for the defendants retained such of the documents that were in their possession and were required to be kept for the "proper record of the proceedings" (J [96]).
In cross-examination during the trial Mr Riches was asked about the Undertaking (tr 206):
Q. And may we take it it's the only form of undertaking that you offer to the court?
A. Yes.
Q. What you are undertaking in paragraph number 1 is that you will delete any and all electronic copies of the documents referred to in schedule A?
A. Mr Kelly, I would, if it would please the court, I will happily give the court my computer, if that makes it easier, because there is that many documents archived in my computer that I would be afraid to miss some and be sitting here again. So the reason I never found all those documents is I didn't know they existed. When it was brought to my attention, my solicitor told me not to delete anything and to hold on to that computer because I didn't believe I had done anything wrong. I agree that those documents are sitting on my computer, but I would, as stated before, be fearful not to capture every document. If the court would like to drive an axe through the computer they may, Mr Kelly, and that would make sure that there is not a single document left that I could obtain.
The plaintiffs' final written submissions at trial included the following (at par [35]):
The fact that Mr Riches offered to allow an axe to be taken to his computers does not overcome the inadequacies of the undertaking. He made it clear that he was not prepared to offer any other form of undertaking. Moreover, he is not to be trusted in his assertion that he believed that he had complied with clause 4(c). At that point in his evidence, the tip-off had not been revealed, still less the conversation between Mr Riches and his wife which puts the lie to his protestations of unintentional breach. The true position is, the conduct of Mr & Mrs Riches was a flagrant breach of contract from which they sought to benefit commercially when they set up the business of Link2.
In final oral submissions the plaintiffs submitted that the Undertaking did not assist in any way because it did not deal with the Software and was conditioned on various non-admissions. It was noted that the Undertaking did not even admit that the documents existed and contained no undertaking not to use the documents (tr 402).
The defendants responded in their written submissions relevantly as follows:
28. The suggested shortfalls in the undertaking made to the Court (Ex B) at PS [33]-[35] are without foundation:
(a) the undertaking does not apply to the Software - that is because, for reasons given above, cl. 4(c) does not cover documents copied from the plaintiffs' software;
(b) it is conditioned by a non-admission - that fact does not say anything about its efficacy or why the plaintiffs have continued to pursue this case. On the basis of their submissions, it can only be to obtain the admissions, even though the outcome they sought to achieve through litigation has been achieved;
(c) it contains no undertaking equivalent to the injunction in prayer 1 - that is true, but says nothing about why prayers 2 and 3 [for delivery up] are still being pursued by the plaintiffs; and
(d) the quoting of the transcript at [34] is selective. It does not include Mr Riches' acceptance that the undertaking extended to the "Link2 copy documents" (T 209. 1-6), as well as to providing Mr Ritchie with copies of the electronic files Mr Riches has agreed to delete (T 210. 1-7).
In final oral submissions the defendants submitted that it should not matter that the Undertaking was without admissions and contended that the plaintiffs were "getting what they are entitled to on their case" under the Deed. It was submitted that the Undertaking was "a complete answer to a claim for relief" in this regard (tr 408).
Judgment was reserved on 14 May 2015 after a seven day trial. Judgment was delivered on 10 August 2015 without further communication from the parties in the interim. It was held that the Undertaking did not obviate the need to deal with the various issues between the parties and the claims made by the plaintiffs (J [105]-[111]).
Mr Riches affidavit of 12 October 2015 included evidence in which he referred to the Undertaking and also to his evidence that he gave under cross-examination wherein he claimed he "made clear that the undertaking applied to any documents which I understand includes the so-called 'hybrid documents'". He then gave the following extraordinary affidavit evidence about his conduct in the two weeks following the conclusion of the trial:
4. On or about 18 May 2015 I made telephone enquiries of a computer company based in the Seaforth area (whose name I recall from the side of a work vehicle was Certified iMac Technician) about the process involved in deleting files from computers. The person I spoke to (whose name I cannot recall) advised me that a full scale reset of a computer would delete from most areas of a computer all information stored on the computer but that he could not guarantee that some information would not be retained in areas of the computers storage (sic) known as disk free space. I was also told that the process or resetting (sic) a computer could take him a couple of days due to his workload.
5. As a result of that discussion I spoke with my wife Kylie, and she and I agreed that the safest and most secure way of ensuring compliance with the undertaking was to physically destroy and then dispose of as rubbish the computers on which there was any possibility that information relating to the plaintiffs could be retained.
6. To the best of my recollection at the time of the search and seizure raid in July 2013:
a. other than a small bundle of hard copy documents which were removed by the independent solicitor and which have not been returned to me, there were no other hard copy documents held by any other defendants anywhere that could in any way be the plaintiffs' documents or copies of the plaintiffs' documents or documents containing information derived from the plaintiffs' documents.
b. The only computers used by either my wife or me which contained any information relating to the plaintiffs' business was an (sic) Macbook Pro which I used and a desktop based computer which was an IMac which contained information that was used mainly by my wife.
c. The Macbook Pro had a serial number W8949AAM66D and the desktop had a serial number W881248LZD3.
d. To the best of my belief and recollection these were the only computers containing any information relating to the plaintiffs.
e. In the period prior to the deed of separation of 12 August 2012 I had used a cloud based date (sic) storage system known as sharefile on which were stored the plaintiffs documents. At or immediately after the singing (sic) of the separation deed I provided to the plaintiffs the passwords to all of the cloud storage databases. After that occurred the passwords were changed by the plaintiffs and I no longer had any access to those cloud based storage systems.
f. I and my wife used mobile telephones being smart phones. However no information of the plaintiffs to the best of my recollection was stored on any of these mobile telephones. In any event these telephones were thrown away by me and my wife in about August 2013 after they were returned to my wife and I having been seized during the search and seizure raid and we replaced these telephones with new mobile phones which had no data stored them on (sic).
7. As a consequence of the discussion I had with my wife on 20 May 2015 referred to above both she and I over the next several days did the following:
a. Each of us went methodically through our home office (being the place at which all administration records and computer equipment is kept);
b. We located 3 USB sticks.
c. We located no documents relating to the plaintiffs' business other than copies of documents attached to affidavits of the plaintiffs supplied to the defendants during these proceedings (the Litigation Documents).
d. We put all of the Litigation Documents in an Archive box and delivered that box to my solicitor David Rydon on or about 27 May 2015.
e. We then went through the two computers referred to above and, after extracting some personal files containing family photographs and similar family information, I physically destroyed both computers. I did this by physically destroying the computers with a sledgehammer. This destruction occurred on or about 27 May 2015.
f. I then disposed of these destroyed computers in a rubbish bin together with the 3 USB sticks referred to above.
8. To the extent that any cloud storage retains copies of any record of the plaintiffs that cloud storage is solely under the control of the plaintiffs and the defendants and my wife no longer any access (sic) to that cloud storage.
9. As a result of the steps taken referred to immediately above I am confident that there is no information relating to the plaintiffs' business in either hard copy or electronic form retained by any of the defendants or my wife.
10. My wife video recorded me destroying the computers as I have described above.
11. Other than the computers referred to above, the defendants do not have in their possession or in their control in any electronic form (whether that be on computer, USB stick, floppy disk or other software storage device) any information that could possibly belong to the plaintiffs.
12. The defendants do not have in their possession any hard copy documents belonging to the plaintiffs or containing information which could possibly belong to the plaintiffs.
13. To the best of my abilities I have taken all steps that I believe are possible to destroy any information retained by any of the defendants which could possibly be regarded as the plaintiffs' information.
Mr Riches' affidavit of 19 October 2015 included evidence that various of the email accounts in respect of which the plaintiffs seek an order for supervised delivery up "never held" and do not hold any of the plaintiffs' copied material. Mr Riches also gave evidence that the HP Laptop had never held any of the plaintiffs' information or copied material and was only recently purchased before the "raid" and only held Link 2 financial material.
Mr Garvin's third affidavit of 21 October 2015 responded to Mr Riches' evidence by reference to the report produced by the independent computer experts. This affidavit included evidence (in contrast to Mr Riches' evidence) that the HP Laptop did include material belonging to the plaintiffs or material copied from the plaintiffs' documents.
As the affidavit of Mr Garvin had only been served on 21 October 2015 (Mr Riches' affidavit of 19 October 2015 being served late) leave was granted for counsel for the defendants to make a submission in response to this evidence by no later than 5.00pm on 23 October 2015. That leave was not taken up. However a form of submission was received on 26 October 2015.
[2]
The destruction of the computers
The defendants sought to characterise the destruction of the computers and the relegation of their remains together with 3 USB sticks to the rubbish bin as compliance with the Undertaking. The plaintiffs described Mr Riches' conduct as "bizarre" (tr 32).
Mr Riches knew that the plaintiffs were seeking findings against the defendants that they retained, copied and used the plaintiffs' Books, Records, Materials and Documentation as defined in the Deed and identified in Schedule A. He and the defendants knew that the plaintiffs were seeking relief that included an order for the delivery up of the documents in Schedule A.
Schedule A lists 121 items, 60 of which were located on the Apple MacBook, 3 of which were located on the Apple iMac and 9 of which were located on the HP Laptop. The remainder were located on USBs or in email accounts. Some of the items listed in Schedule A found on the Apple MacBook and the HP Laptop are described as being located in a "Dropbox". It would appear that the defendants accept that such documents still exist notwithstanding the destruction of the computer hardware.
Mr Riches' conduct in destroying items the subject of the search order without notice to the plaintiffs (and it would appear his own solicitors) or the Court at a time when the issue of the Undertaking was live for consideration in a reserved judgment was most inappropriate. This does not seem to have been appreciated by the defendants or their lawyers at the hearing on 21 October 2015 having regard to the submission that such conduct was in compliance with the Undertaking.
Even assuming that the defendants somehow thought that they were to act on the Undertaking before the proceedings were concluded, their conduct was far from in accordance with it. There was nothing in the Undertaking about the physical destruction of the computers. There was no notification to the plaintiffs' solicitors in accordance with the Undertaking. The conduct remained undisclosed until Mr Riches' affidavit of 12 October 2015 was served.
It is understandable that this conduct is relied upon by the plaintiffs in support of the contention that it is necessary to make an order for delivery up and that the process should be supervised.
[3]
Injunctive relief
The order proposed by the plaintiffs in respect of the injunction is as follows:
ORDERS THAT the defendants are permanently restrained from directly, or indirectly, using and/or copying the Business Manual, the Elevator Take, the Systems Manual, the Software and the Software Manual, and any copy thereof or document derived therefrom, including without limitation the Books, Records, Materials and Documentation listed in Schedule "A".
As I have said above the defendants do not oppose an injunction in this form so long as the "Software" is not included within it.
The form of the orders proposed by the plaintiffs includes the following definition:
"Software" means the software programme developed to the plaintiffs' specifications in connection with the booking of student accommodation and storage of information.
The defendants object to this definition. The Software was defined in the pleading as "an original software programme developed to specifications directed by the Ezystay Group, with a password protected interface to enable persons with access credentials to book student accommodation and store information" (par [36]).
The defendants contend that it is essential that they understand precisely the nature and effect of the orders sought by the plaintiffs. There is no issue that in order to be enforceable an injunction must be so expressed that the defendants know what they are required to do or refrain from doing: Athens v Randwick City Council (2005) 64 NSWLR 58 per Hodgson JA at [31]. It was submitted that if Software is to be included in the order and the definition for which the plaintiffs contend in their proposed order were to be accepted, the defendants would be uncertain as to what they are required to do or refrain from doing. The defendants also contend that the proposed definition of Software in the order does not have the limiting phrase "as at 1 July 2012". It was contended that the pleading had this limitation. However it did not. Rather it was held that Mr Riches copied the plaintiffs' Software when he instructed Mr Singh in late May 2012 and in June 2012.
The complexity of the plaintiffs' case in respect of the copying of the Software is referred to in the judgment (J [233]). Notwithstanding those complexities the finding was made that the plaintiffs' Software contained the plaintiffs' confidential information and that Mr Riches copied and used the plaintiffs' Software (J [235]). The finding was also made that from sometime after 16 July 2012 Link 2 employed an accommodation and booking software and system which was the same or substantially the same as the Ezystay Software and that described in the Software Manual (J [236]).
The defendants submitted that any injunction must be limited to those aspects of the "interface" or "visual output". This submission is based upon the following portion of the judgment:
234. I do not accept Mr Riches' evidence that although he forwarded the Software email to himself and to his wife he did not open the iNE document or read it. I am satisfied that his conduct in giving Mr Singh explicit instructions that matched identically those parts of the interface contained in the plaintiffs' booking system and Software amounts to copying the plaintiffs' Software.
The defendants submitted that the lack of precision in the proposed injunction in respect of the Software may be contrasted with the precise nature of the orders made in Dynamic Supplies Pty Ltd v Tonnex International Pty Ltd (No 2) [2011] FCA 675. In that case Yates J made orders which specified the electronic files which were required to be deleted and the hard copies that had to be destroyed. In that case the respondent continued to publish contravening representations after the trial judge delivered his reasons. His Honour was satisfied that an injunction should be granted but for certain undertakings that were provided personally on behalf of the respondent. A distinguishing feature in that case was that the respondent did not at that time use the compatibility charts which were found to infringe the applicant's copyright. In the present case the defendants are using software based on the copying of the plaintiffs' Software. In Dynamic Supplies the applicant also submitted that the respondent's conduct was deliberate and could not be explained away by inadvertence (at [16]). In the present case Mr Riches' evidence that his conduct in retaining the plaintiffs' documents was inadvertent is in my view highly unreliable. Having regard to his conduct in destroying the computers the subject of the search order and the subject of an issue to be decided in the reserved judgment leads to the conclusion that he has little understanding of the need to permit the Court process to be concluded before taking matters into his own hands.
The defendants submitted that if the injunction sought by the plaintiffs were to be granted it would deny the defendants the ability to conduct any form of student accommodation business based upon an online booking system. It was contended that this would be a clear restraint of trade: Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at [50]-[54]. The defendants also submitted that the onus is on the plaintiffs to demonstrate that the restraint is reasonable: McHugh v Australian Jockey Club (2014) 314 ALR 20 at [4].
Putting to one side for the moment the alleged lack of precision in the plaintiffs' proposed order regarding the Software, I am not satisfied that such an order would be in restraint of trade. The defendants would be free to establish an online booking system for their student accommodation business independently of any use of the plaintiffs' Software
Injunctions restraining breaches of confidentiality afford plaintiffs the opportunity to "nip in the bud" such breaches and their consequences: GE Dal Pont, Law of Confidentiality, (1st ed 2015, LexisNexis Butterworths) at [15.1]. In this regard injunctions are often sought on an urgent interlocutory basis to prevent the offender from obtaining a springboard effect (or head start) in setting up a new business using the plaintiffs' confidential information.
In the present case a search order (Anton Piller KG v Manufacturing Processes Ltd [1976] 2 WLR 162) was obtained and executed in July 2013 but the plaintiffs did not seek an interlocutory injunction restraining the defendants from using the Software. The plaintiffs filed their Statement of Claim in August 2013 in which they sought a permanent injunction, delivery up of documents and/or destruction of electronic copies of documents, damages, and/or equitable compensation, an account of profits and/or compensation under s 1317H of the Corporations Act 2001 (Cth). This was the form of relief upon which the case was prepared from 2013 and fought until the second day of the trial, 1 May 2015, when Mr Kelly advised that the claim for an account of profits "may well be barren by reason of the organisation of the fruits of the venture through a network of trusts and other corporate entities" which "indeed demonstrates that damages would not be an appropriate remedy". Mr Kelly also advised that the "primary relief sought is the permanent injunction including the order for return" (tr 138).
On 6 May 2015 Mr Kelly advised that if all that was sought to be delivered up in prayer 2 of the pleading was delivered up and the plaintiffs were protected against further breach "that is the end of the matter" (tr 340). It therefore appeared that although the claims for damages, an account of profits and compensation were still in the pleading, they were no longer to be pressed if those conditions were satisfied. The plaintiffs' outline of closing submissions (dated 13 May 2015) referred only to the relief sought by way of permanent injunction and delivery up and contended that the final form of any relief should abide the delivery of judgment (J [247]).
The defendants have been operating their businesses utilising their software since September 2012 when the Link 2 website went "live" (J [190]). There was no restraint on the defendants (or Mr Riches) in setting up the same type of business in competition with the plaintiffs. They were free to do so constrained only (relevantly) by the terms of the Deed in which they agreed not to copy and or use the plaintiffs' Confidential Information. They copied and used the Confidential Information in setting up a pivotal part of the defendants' business - the software containing the booking system. That has been in place for the last three years and it has been modified over that time.
The extent to which and the timeframe during which the defendants obtained any springboard or advantage has long since passed and the plaintiffs abandoned any claim for damages or compensation.
An injunction is not unreasonable merely because it is permanent: Curtiss-Wright Corporation v Edel-Brown Tool & Die Co (1980) 407 NE 2d 319 at 326. However any unfair advantage must still exist at the time that the injunction is sought. Injunctions are issued to protect against and to prevent future and further losses. It is important to avoid a result that would simply punish the defendants for their conduct or past breaches of contract: Franke v Wiltshek (1953) 209 F 2d 493 at 503; Universal Thermosensors Ltd v Hibben & Ors [1992] 1 WLR 840 at 855; UBS Wealth Management (UK) Ltd v Vestra Wealth LLP [2008] EWHC 1974 (QB) at [4].
The definition of "Software" in the proposed injunction would leave the defendants in uncertainty as to whether they are to stop using their own software altogether or only those parts of it that have not been modified over the years. There is also the question of the consequence and effect of the modifications and the status of the software once modified. There is also the important question of proportionality: Tang Siew Choy v Certact Pte Ltd [1993] 1 SLR(R) 835. There was no attempt by the plaintiffs to prove any loss of their business to the defendants by reason of the copying of the Software. The advantage the defendants obtained was the capacity to set up their business more quickly than if they had established their software 'from scratch'. Even then the timeframe was probably short because Mr Riches was well-versed in the creation of software for a student accommodation business, he having instructed Mr Davis.
Even if it be assumed that the proposed injunction would restrain the defendants from using their software altogether and require them to create new software for the operation of their booking system, I am satisfied that this would be out of all proportion to any advantage secured by the defendants by their breach.
I am not satisfied that the injunction should include the "Software".
[4]
Delivery up orders
As I have said Mr Riches' extraordinary conduct referred to earlier establishes that the Court could have little confidence in the veracity of his claims. I am satisfied that the orders sought by the plaintiffs for delivery up of the materials pursuant to the Deed should be made and that there should be supervision of that process by the lawyers for the respective parties. I am not satisfied that it is necessary to impose a regime in which Klein & Co are once again involved.
[5]
Costs
There are two aspects of the proceedings on which the defendants rely to submit that the plaintiffs should not have the total costs of the proceedings. The first is the failure of the Trade Dress claim. The second is the abandonment of any claim for damages and/or compensation and/or an account of profits. Although there was no evidence called on this aspect of the matter the plaintiffs submitted that the so-called "abandonment" was as a result of the financial statements of the defendants being produced to show there was no profit made so that the claim was of no utility. The plaintiffs accept that they failed in the Trade Dress claim but submitted that this was a small part of their overall claims.
I am satisfied that the plaintiffs failure to make out the Trade Dress claim and their abandonment of the claims for damages, compensation and an account of profits should be reflected in any costs award. I am satisfied that the just and equitable outcome is to reduce the plaintiffs' costs by 15%. Accordingly the plaintiffs will have a costs order in their favour for 85% of the costs of the proceedings.
The next question is whether the plaintiffs should have their costs on an indemnity basis. Although much has been said about the communications between the parties and the stances they took prior to the trial, I am not satisfied that such communications impact significantly on the determination of this aspect of the case.
The plaintiffs submitted that had Mr Riches and the defendants filed an affidavit on 31 July 2013 that was candid, admitting the retention of the plaintiffs' documents, much of the proceedings or indeed the whole of the proceedings may have been avoided. There is no doubt that the affidavit lacked candour. It was obvious that the defendants retained many of the plaintiffs' documents inconsistently with their obligations. It is also clear that they must have known that they had plagiarised the plaintiffs' documents and used them in the business development of Link 2. This was kept secret until the latter part of the trial when the forensic decision to call Mrs Riches brought much of Mr Riches' evidence about inadvertent retention of the plaintiffs' documents and lack of use of the hybrid documents undone. In this regard the plaintiffs relied upon McBride v Christie's Australia Pty Limited (No 2) [2015] NSWSC 754 in which an indemnity costs order was made against Christie's on the basis that its conduct in not informing the plaintiff of its serious concern about the genuineness of the Painting (which if provided may have avoided the whole of the proceedings) was unreasonable (at [60]).
As unsatisfactory as the defendants' conduct has been I am not satisfied that it warrants an order for indemnity costs. One of the reasons the defendants propounded and maintained their defences was an arguable case that the material that they had retained, copied and used was not confidential. There was also a respectable argument in respect of the construction of the Deed. In all the circumstances I am not satisfied that the plaintiffs should have an award of indemnity costs.
The Orders are as follows:
The defendants are permanently restrained from directly, or indirectly, using and/or copying the Business Manual, the Elevator Take, the Systems Manual and the Software Manual, and any copy thereof or document derived therefrom, including without limitation the "Books, Records, Materials and Documentation" as defined in the Deed of Settlement and including those items listed in Schedule "A" to the Second Further Amended Statement of Claim filed on 6 May 2015 (Schedule A).
Within 28 days of the date of these orders the defendants shall (at the defendants' expense):
(a) deliver up to the defendants' solicitor (David Rydon) for destruction (after provision of a complete copy to the plaintiffs' solicitors) all documents or electronic files which are in the possession, custody or control of the defendants, their employees, servants or agents, including those stored in the Defendants' Email or Online Storage Accounts, which record, copy or reproduce, or are derived or adapted from the Business Manual, the Elevator Take, the Systems Manual and the Software Manual, or a substantial part thereof, including the "Books, Records, Materials and Documentation" as defined in the Deed of Settlement and including those items listed in Schedule A (the Copied Materials);
(b) provide to the plaintiffs' solicitors a complete copy of the Copied Materials; and
(c) under the supervision of the defendants' solicitor (David Rydon), and the plaintiffs' solicitors, delete or otherwise destroy all of the Copied Materials.
Within 35 days of the date of these orders:
(a) the first and second defendants (by their proper officers) and the third defendant make, file and serve on the plaintiffs' solicitors an affidavit verifying the steps that they have taken to comply with Order 2; and
(b) the defendants' solicitor make, file and serve on the plaintiffs' solicitors an affidavit verifying the steps taken to comply with Order 2.
The defendants shall pay 85% of the plaintiffs' costs of and incidental to the proceedings.
In these orders the following definitions apply:
(a) "Deed of Settlement" means the Deed of Settlement dated 13 August 2012 between David Ritchie, the plaintiffs and the second and third defendants, which is described in paragraph [72] of the judgment ([2015] NSWSC 1105) (the Judgment);
(b) "Defendants' Email or Online Storage Accounts" means the following email and online storage accounts identified in the report of Klein & Co dated 25 July 2013:
Klein & Co Identifier Service Provider Display name User Name
K473201A Google link2 info info@link2.com.au
K473202A Google Kylie Drew kylie@link2.com.au
K473203A Google Accounts Link2 accounts@link2.com.au
K473204A Google greg riches griches25@gmail.com
K473205A Google Kylie Riches kylie.riches2092@gmail.com
K473207A Dropbox Kylie Riches kylie@link2.com.au
K473208A Google benson saap bensonbnps@gmail.com
[6]
(c) "Business Manual" means the document which is described in paragraph [131] of the Judgment;
(d) "Systems Manual" means the model relating to the operation of the plaintiffs' business which is described in paragraph [142] of the Judgment;
(e) "Elevator Take" means the summary, the terms of which are set out in paragraph [150] of the Judgment;
(f) "Software Manual" means the manual for the Software, which is described in paragraph [185] of the Judgment.
[7]
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Decision last updated: 29 October 2015