Marasol Pty Ltd v Philips [2025] FCA 945

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

1. Though it is unusual to give reasons in relation to the making of case management directions, certain unfortunate aspects of this case necessitate that something be said of the conduct of the defendant and his legal representatives in this matter.
2. A first case management hearing was held in this matter on 1 August 2025. On that occasion, a number of programming orders were made to carry this matter forward to a mediation. If the matter does not resolve, it will come back to the Court for further case management directions.
3. As will be seen, the pivotal difficulty before the Court today is the discordance between (a) the quantum in dispute; and (b) the manner in which the parties propose to conduct the litigation.
4. The quantum in dispute is about $60,000. At the hearing, it became apparent that this estimate was appreciated by all parties. On any view, it is a trivial amount to be litigated in this Court.
5. The issues which are likely to be in dispute are excerpted below and appear, prima facie, to be relatively straight-forward. Nonetheless, the costs involved in litigating this matter to judgment would, on a conservative estimation, fall somewhere between $150,000 to $300,000. That is a substantial amount compared to the amount in dispute. On any view, it is disproportionate.
6. The plaintiff is, of course, entitled to bring the matter in this Court and there are reasons why they should. It is a commercial dispute involving matters of commercial equity and of the performance of common law and statutory obligations. Moreover, it is axiomatic that the plaintiff is, in general terms, entitled to vindicate its rights as it best sees fit. If it apprehends that its commercial rights have been transgressed, it is entitled to use this Court as the forum of redress. Nevertheless, it is important to keep steadily in mind that the cost of doing so greatly exceeds the amount in dispute and that imposes constraints which do not exist in larger matters.

The obligations in relation to the conduct of litigation in the Federal Court

1. These circumstances bring into sharp focus ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act). Section 37M(1) provides that:

(1) The overarching purpose of the civil practise and procedure provisions is to facilitate the just resolution of disputes:

(a) according to law; and

(b) as quickly, inexpensively and efficiently as possible.

(2) Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:

(a) the just determination of all proceedings before the court;

(b) the efficient use of the judicial and administrative resources available for the purposes of the court;

(c) the efficient disposal of the court's overall caseload;

(d) the disposal of all proceedings in a timely manner;

(e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.

1. The matter referred to in subparagraph (e) is particularly relevant in the present context.
2. Section 37M(3) goes on to provide:

(3) The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.

1. That particular subsection involves the imposition of an obligation, upon the Court, to advance the "overarching purpose" identified in s 37M.
2. Section 37N of the Federal Court Act imposes obligations upon litigants. It says, in subsection (1), that:

(1) The parties to a civil proceeding before the Court must conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose.

1. Subsection (2) imposes obligations upon lawyers to conduct litigation on behalf of their clients in a manner that assists them to comply with the duty to observe the overarching purpose:

(2) A party's lawyer must, in the conduct of a civil proceeding before the Court (including negotiations for settlement) on the party's behalf:

(a) take account of the duty imposed on the party by subsection (1); and

(b) assist the party to comply with the duty.

1. Subsections (4) and (5) grant the Court wide powers in relation to the costs of the proceedings and, in particular, the ability to order costs against parties or their legal representatives who fail to act in a manner that is consistent with the overarching purpose:

(4) In exercising the discretion to award costs in a civil proceeding, the Court or a Judge must take account of any failure to comply with the duty imposed by subsection (1) or (2).

(5) If the Court or a Judge orders a lawyer to bear costs personally because of a failure to comply with the duty imposed by subsection (2), the lawyer must not recover the costs from his or her client.

1. As I noted in Pieman Resources Pty Ltd v Monks [2025] FCA 88 (at [51]), these provisions do not, and should not be seen to, contain empty rhetoric. Litigation in this Court in 2025 is not some form of Galápagos Island where the ordinary rules do not apply: see CVDQ v Minister for Immigration and Multicultural Affairs [2025] FCA 936 [1].

1. The central factor which drives this litigation is the relatively trivial amount of $60,000. That is said to be the damage which has been suffered by the plaintiff, or the benefit gained by the defendant, Mr Philips, following his alleged misuse of confidential information. In short, it is alleged that Mr Philips was employed in the business of the plaintiff and that, in such capacity, he owed a number of obligations to it in relation to the confidentiality of information of which he came to know (or was otherwise aware of) in the course of his employment activities. It is also said that Mr Philips entered into an employment agreement with the plaintiff in September 2023, which is alleged to be the source of further obligations of confidence. Whilst the plaintiff makes several other allegations as to the statutory and common law obligations of Mr Philips (and his alleged derogation from them), they are neither here nor there for present purposes.
2. Central to the plaintiff's case is an allegation that Mr Philips, whilst an employee of the plaintiff and performing his duties as such, obtained the details of a customer or potential customer of the plaintiff. It is said that he pursued the opportunity of performing work for that customer on his own behalf. From this, it is then said that he breached various duties which he owed to the plaintiff and, thereby, deprived it of the benefit which would otherwise have enured to it.
3. It must be stressed that the foregoing is merely a recitation of what are mere allegations. To date, no evidence has been adduced or tested in the litigation, and it is not possible to make any assessment of the veracity of the plaintiff's allegations. There may be valid defences to them, though the defendant has not yet been required to plead. This being so, no weight is given to the allegations made other than the fact that they form the basis of the claim being advanced.
4. Nonetheless, the claim concerns the misuse of confidential information and the benefit obtained by Mr Philips. In this respect, it must be kept steadily in mind that whatever did occur, and the amount of the benefit that was obtained by Mr Philips, if any, is something that is peculiarly known by him. If he did pursue and exploit an opportunity which he obtained by reason of his employment, that is not something the plaintiff would have more than some general knowledge of. Any reasonable practitioner would be aware of this and of the near impossibility of the plaintiff providing particulars before appropriate discovery has occurred. It is for that reason that, in cases of this nature, a court will order the defendant to make discovery before the plaintiff is required to give any further and better particulars of those matters which are peculiarly within the defendant's knowledge: Egg and Egg Pulp Marketing Board v KH Korp Tocumal Trading Co Pty Ltd [1963] VicRp 52; [1963] VR 378; see also Millar v Harper [1888] UKLawRpCh 47; (1888) 38 Ch D 110.
5. Even if such well-known authorities were not hitherto known, anyone giving even the most cursory consideration to the nature of the case being advanced would appreciate that particulars of how much Mr Philips made, if he did engage in the conduct in question, is a matter which he and the third party would know, but not a matter which the plaintiff, his employer, would.
6. With that in mind, the parties came to Court on the case management hearing seeking various orders. In effect, the plaintiff seeks, quite appropriately, that pleadings be exchanged and the matter immediately proceed to mediation. Such an approach is proper in the circumstances, in that it seeks to crystallise the relevant issues and then bring the parties together in a mediation to attempt to resolve this relatively small matter.
7. Somewhat bizarrely, the defendant instead seeks to cause the parties to prepare the matter through to the exchange of evidence (such that the matter would be ready for trial). Then, and only then it is said, should a mediation be attempted. To paraphrase the submission made by Counsel for the defendant, the parties should be in the best position possible to know everything about the case before they go to mediation. In fulfilment of this objective, the defendant is desirous to file and serve a Request for Particulars of the Statement of Claim, with the request directed to, inter alia, the quantum of the plaintiff's claim - of course, that is something which it cannot presently tell them. The inappropriateness of this course is rather patent, as the above discussion reveals. It is unfortunate that this alleged desire for particulars appears to be nothing more than a delaying tactic or, perhaps, an attempt to put the plaintiff to expense.
8. Thereafter, and following receipt of such particulars, the defendant is content to file a Defence and seeks that, in turn, a Reply be filed some one week later. It was then suggested that the affidavit material on which the parties will rely at trial ought be exchanged. Keeping in mind the parties accept that the amount in dispute is $60,000, this suggestion is almost inconceivable and in no way consistent with the defendant's obligations to act in accordance with the overarching purpose referred to in s 37M of the Federal Court Act.
9. It is only after those steps have occurred that the defendant is prepared to attend a mediation.
10. This desire upon the defendant's part to be as informed as he may be on the eve of trial before attempting a mediation, is misplaced. Necessarily, parties will always attend mediations with imperfect knowledge of the circumstances of the case and will need to accommodate for that. Moreover, it is plain that the necessary corollary of obtaining additional information about the circumstances in dispute is the expenditure of additional money. In a case such as the present, where the disputed sum is minimal, it is absurd to suggest that substantially more money than is in dispute ought to be expended by both sides prior to any attempt being made to resolve the matter through a structured mediation. It is a suggestion that is wholly contrary to the objective of the "just resolution of disputes", as "quickly, inexpensively and efficiently as possible". It is the antithesis of the obligation to attempt to resolve disputes at "a cost that is proportionate to the importance and complexity of the matters in dispute". The importance of a matter includes the amount in dispute and the suggestion that each side spend multiples of that amount before attempting to negotiate a settlement is, in no way, aligned with that statutory obligation.
11. The source of the timetabling suggestions advanced on behalf of the defendant is not clear on the material before the Court, but it can and must be assumed that, in part, the putting forward of the problematic steps by the defendant was supported, or contributed to, by the defendant's solicitors and counsel. It is unclear whether the defendant is responsible for the nature of the orders suggested on his behalf and, for present purposes, it can and should be assumed that his legal representatives failed in their duty to explain to him the obligations imposed on litigants by the Federal Court Act. Nevertheless, what is clear is that the legal representatives must be taken to have known of their obligations under those provisions and, yet, they were prepared to advance the taking of steps which would work contrary to achieving the statutory objective.
12. While it is not necessary to make any finding in this respect, the proposing of procedural steps as the defendant did in this case can give rise to the impression that he was attempting to use the cost of litigation as a weapon in defeating the plaintiff's claim. It would be most unfortunate if that was the case.

1. The procedural orders proposed by the defendant are inappropriate. They should be rejected.
2. It has been said on many occasions that litigation is not some game to be played: see, eg, White v Overland [2001] FCA 1333 [4]; Tremeer v City of Stirling [2002] WASCA 281 [33]. That is particularly so in commercial courts. In dealing with matters in accordance with ss 37M and 37N of the Federal Court Act, the amount in dispute between the parties will always be a significant matter. That is not to deny that vindication of a right by a party that has been wronged is not a legitimate use of the Courts, despite the quantum of any resulting damage being relatively small. It may, for instance, be commercially very valuable for a party to establish that they are prepared to protect their rights and interests. Nevertheless, it will often be the case that the amount in dispute between the parties will be a key factor in guiding the manner in which litigation progresses. The required proportionality between the disputed amount and the cost of litigation must, in the ordinary course of events, be respected.
3. Here, where that amount is only $60,000 and no particular point of principle appears to arise, it would self-evidently be contrary to the obligations imposed by the Federal Court Act for the Court to order otherwise than that the parties participate in a mediation as soon as possible and before any substantial expense is incurred.
4. The plaintiff's proposed timetable appropriately seeks to crystallise the issues in dispute to the extent necessary and then requires the parties to mediate in an attempt to resolve the matter at an early stage. If the matter does not settle, it can return to the Court for further directions which will endeavour to bring the dispute to a speedy trial.

1. Counsel for the plaintiff submitted the appropriate order for costs is that they be each party's costs in the cause. No submission was made to the effect that some other party pay the costs of today's hearing and, accordingly, I will not consider whether such orders are appropriate.
2. Despite that, where a legal practitioner attends a case management hearing and proposes a timetable that is wholly inappropriate, it might reasonably be assumed that they have failed to observe the obligations of ss 37M and 37N of the Federal Court Act, and, perhaps, deliberately so. If that conclusion is reached, an order that they pay the costs incurred by the other party would not be unreasonable.

1. These are the amended and revised reasons for judgment given on 1 August 2025. Whilst the reasons given above refine and develop those that were delivered ex tempore, the substance of what was said on 1 August 2025 has not been changed nor has any other material change been made.

I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.