Heartbeat Nursing Agency Pty Ltd v Horne

REASONS FOR JUDGMENT 1 This judgment concerns the appropriate costs order that should be made in these proceedings, which were dismissed for want of prosecution on 6 March 2008. 2 The applicant provides labour hire to hospitals and aged-care facilities throughout New South Wales. It commenced proceedings against the first and second respondent on 9 August 2005. It sought,amongst other things, declarative and injunctive relief. At the same time it filed a notice of motion seeking an ex-parte Anton Piller order. The applicant alleged that the first and second respondent, in concert, misused the applicant's confidential information in the course of undertaking a labour-hire business known as All Saints Nursing Agency. The applicant sought an Anton Piller order to allow it to enter the premises of All Saints Nursing Agency and seize documents and computer records. On 9 August 2005, Graham J made the Anton Piller order and it was executed on 10 August 2005. 3 The applicant's notice of motion was made returnable before a duty judge on 15 August 2005. No orders were made on this occasion by the duty judge other than adjourning the proceedings and giving liberty to apply. On 15 August 2005, the applicant filed a statement prepared by Mitchell Bezzina of Forensic Data Services Pty Ltd setting out the steps undertaken by Forensic Data during the course of the execution of the Anton Piller order and the steps taken to copy the respondents' computer hard drive. 4 On 6 October 2005, the respondents filed a notice of motion seeking orders that: (a) the orders made on 9 and 10 August 2005 be vacated; (b) the proceedings be dismissed; (c) an inquiry be made and the damages payable by the applicant to the respondents pursuant to its undertaking to the Court; and (d) costs on an indemnity basis of the costs incurred by the Respondents in these proceedings. The respondents' notice of motion was made returnable before me on 25 October 2005. 5 On 24 October 2005, the applicant served on the respondents the final forensic report prepared by Mitchell Bezzina (dated 23 September 2005), and an affidavit of Jonathan O'Riordan (dated 24 October 2005), who is the applicant's solicitor. The affidavit concerned material obtained during the execution of the Anton Piller order. 6 On 25 October 2005, I made the following orders substantially by consent: 1. The applicant file and serve a verified statement of claim by 4 pm on 1 November 2005. 2. The parties be granted liberty to restore the matter for directions on three days' notice. 3. The matter be stood over for further directions at 4.30 pm on 28 November 2005. 4. Costs be reserved. 7 Shortly before the matter next came before me on 28 November 2005, the applicant served on the respondents a draft statement of claim, as well as an affidavit of Catherine Bouvy, sworn 28 November 2005. 8 The matter was adjourned to 29 November 2005. I then made the following orders: 1. Order 6(e) made by this Court on 9 August 2005be varied to enable the Applicant's legal advisors to show the Applicant's Managing Director, Johan Vitali, and its General Manager, Catherine Bouvy, the draft Statement of Claim served upon the Respondents on 28 November 2005 and all documents referred to therein and only those documents. 2. The Applicant provide the Respondents with copies of all documents seized during the execution of the orders of this Court of 9 August 2005, including the documents listed in Schedule C of the draft Statement of Claim served upon the Respondents on 28 November 2005, by 4pm 30 November 2005. 3. The Applicant file and serve a verified Statement of Claim by 4pm 9 December 2005. 4. The Respondents file a Defence and Cross Claim, if any, by 3 February 2006. 5. The matter be listed for directions at 9:45 am on 10 February 2006. 6. The notice of motion filed on behalf of the First and Second Respondents dated 6 October 2005 be stood over until 10 February 2006. 7. The parties exchange any submissions in relation to costs on or before 7 February 2006 in order that the Court might deal with the question of costs on 10 February 2006. 8. Costs reserved. 9 The applicant filed its statement of claim on 28 December 2005. 10 On 9 February 2006, the respondents' solicitor wrote to the applicant's solicitor suggesting that the matter be referred to mediation. At this stage the respondents had not filed a defence or cross-claim. 11 On 10 February 2006, I was informed that the parties wanted to explore mediation. I made the following orders: 1. The respondent serve on the applicant details and particulars of the basis of the defence and the basis of any cross claim if pursued, within 7 days. 2. The parties have liberty to apply on 3 days' notice. 12 No further orders were made in the proceedings until they were dismissed for want of prosecution at a directions hearing on 6 March 2008. Both parties consented to this course. The hearing on that day resulted not from a request of either party, but at my initiative. It appears the parties may have corresponded in relation to mediating the matter, however there is nothing to indicate that the parties actually engaged in mediation. 13 Against this background, the respondents seek their costs from the applicant on an indemnity basis. They have made perfunctory written submissions in support of that order. 14 The general discretion conferred by s 43 of the Federal Court of Australia Act 1976 (Cth) to award costs is absolute and unfettered, except that it must be exercised judicially, not arbitrarily or capriciously, and cannot be exercised on grounds unconnected with the litigation: Trade Practices Commission v Nicholas Enterprises Pty Ltd and Ors (No. 3) (1979) 42 FLR 213 at 219 per Fisher J; Probiotec Limited v The University of Melbourne [2008] FCAFC 5 at [45] - [47] per Rares J. 15 Ordinarily, costs follow the event and a successful litigant receives costs in the absence of special circumstances justifying some other order: Ruddock v Vardalis (No 2) (2002) 115 FCR 229 at 235. Awards of costs are compensatory, not punitive: Latoudis v Casey (1990) 170 CLR 534 per McHugh J at 567. 16 As a general principle, costs are awarded on a party-party basis unless there are special or unusual circumstances. Some of the broad classes of circumstances in which the exercise of discretion to award indemnity costs may be appropriate are referred to by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234. 17 The issue of the interaction between Anton Piller orders and costs was considered by Brereton J in Austress Freyssinet Pty Limited v Michael Joseph & 2 ors [2007] NSWSC 1513. In Austress, the plaintiff alleged that the defendants were using the plaintiff's confidential information obtained by the first defendant while he was employed by the plaintiff, and sought (and was granted) an Anton Piller order. His Honour said: (at [4]): … it was well open to his Honour [the judge who issued the Anton Piller order] to take the view that there was an extremely strong prima facie case that confidential information was being misused during the period Mr Joseph was still employed by the plaintiff. If an employee with knowledge of the methods by which an entity such as the plaintiff prepares its tenders and its margins goes into opposition, it seems to me that the damage, potential or actual, from misuse of this information is shown to be very serious to the plaintiff. There was, however, no final hearing of the matter as the proceedings were settled. Nevertheless, the Court awarded the plaintiff its costs of the proceedings. As Brereton J said (at [15]): In my view, this is a case in which the plaintiff has had to come to Court to obtain relief to which it was entitled, in the face of threatened and actual breaches of confidence by a senior employee which had the potential to occasion it serious damage. I am unable to see why the circumstance that [the first defendant] recognised the inevitable by consenting to the injunctive relief sought a year after the proceedings were initiated, after contesting the interlocutory relief initially, should deprive Austress of the costs to which it would have been entitled had the same relief been obtained over opposition. 18 Notwithstanding the approach of the Court in Austress, the Court must weigh the difficulty of deciding how the costs of the litigation should be borne when there has been no hearing on the merits. As McHugh J stated in Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 at 624 - 625: In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action ... Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.