Metcash Limited v Jardim & Anor

LEGISLATION CITED : Uniform Civil Procedures Rules, NSW

Calderbank v Calderbank [1975] 3 WLR 586 CASES CITED : Jones v Bradley (No 2) [2003] NSWCA 258 Metcash v Jardin (No 3) [2010] NSWSC 1096 Waters v PC Henderson (Aust) Pty Ltd, NSWCR 6 July 1994, unreported

TEXTS CITED : Ritchie's Uniform Civil Procedure NSW

Metcash Limited ACN 112 073 480 (First Plaintiff) PARTIES : Metcash Trading Limited ACN 000 031 569 (Second Plaintiff) Jaoa Louis Jardim (First Defendant) Jardim Investments Pty Limited ACN 145 255 894 (Second Defendant)

M White (Plaintiffs) COUNSEL : I M Neil SC (First Defendant) R Gration (First Defendant) A Zahra (Second Defendant)

Freehills (Plaintiffs) SOLICITORS : Harmers (First Defendant) Clamenz Corporate Lawyers (Second Defendant)

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2010/242993 METCASH LIMITED ACN 112 073 480 & ANOR v JOAO LOUIS JARDIM (AKA LOUIS JARDIN) & ANOR (NO 5)

1 The outstanding question in this matter is one of costs. 2 In the judgment I delivered on 29 September 2010 (see Metcash v Jardin (No 3) [2010] NSWSC 1096) I found, in essence, that:

a The first defendant, Mr Jardin, was entitled to give 3 months' notice terminating his employment deed with the plaintiffs, Metcash, and that that deed did not terminate on 1 March 2011 as alleged by Metcash; b That during the notice period Mr Jardin should be restrained from engaging in activities that involved a breach of the restraints contained in the deed; c The injunctions should be extended for a further period of approximately 5 weeks on the basis that Mr Jardin had breached the restraints during the notice period and, in doing so, had obtained a head start; d That an injunction should be granted against the second defendant, Jardim Investments Pty Ltd, on the basis that, in a number of respects, it had or was threatening to engage in conduct as an agent for Mr Jardin in breach of the restraints. However, I found that in making an investment in excess of 5 percent of the issued capital of SPAR Australia Limited, Jardim Investments was not acting as an agent for Mr Jardin and consequently was not in breach of a restraint on Mr Jardin prohibiting an investment of that type. 3 Mr Jardin submits that there should be no order for costs as between him and Metcash up to and including 11 August 2010 and that Metcash should pay his costs from that date. Alternatively, Mr Jardin submits that there should simply be no order for costs. Mr Jardin seeks to justify his submission that there should be no order for costs on the basis that he and Metcash each enjoyed partial success. The submission that Metcash should pay Mr Jardin's costs from 12 August is based on an offer of compromise. 4 Jardim Investments submits that Metcash should pay its costs of the whole proceedings or alternatively its costs in relation to Metcash's application for an interlocutory injunction against Jardim Investments on the basis that it was ultimately successful in resisting Metcash's application for an injunction restraining it from investing in SPAR Australia. 5 I do not accept Mr Jardin's submissions. 6 The starting point is UCPR r 42.1, which provides: "Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs." 7 Mr Neil, who appeared for Mr Jardin, submitted that there were two "events" in this case: the orders made in relation to Metcash's amended statement of claim and the orders made in relation to Mr Jardin's amended cross-claim in which he sought a declaration that he: "… was entitled to give 3 months' notice of termination of the Employment Deed and did so on 26 July 2010 with the effect of terminating the Employment Deed on 26 October 2010."

Mr Neil says that the parties had partial success in their respective claims, but neither enjoyed complete success in the sense of obtaining the orders they sought. 8 I do not accept this characterisation of the relevant events for the purpose of UCPR r 42.1. In determining the relevant event or events, it is necessary to consider the practical result or results in the proceedings. Ordinarily, the court should not attempt to differentiate between different issues in the proceedings and to consider success or failure in relation to each issue. However, exceptions exist where a party fails on an issue which was clearly dominant or which was clearly separable from the matters on which it succeeded: Waters v PC Henderson (Aust) Pty Ltd, NSWCR 6 July 1994, unreported; Ritchie's Uniform Civil Procedure NSW para [42.1.15]. 9 In this case, Metcash sought injunctions against Mr Jardin restraining him from breaching restraints contained in his employment deed in circumstances where he had committed breaches of those restraints and was, unless restrained (and leaving aside for the moment any offer of compromise), threatening to continue those breaches. Metcash was successful in obtaining injunctions which, broadly speaking, were in the form sought by it. It is true that the injunctions were not for the period sought by Metcash. However, they were clearly injunctions resisted by Mr Jardin and Mr Jardin failed in resisting them. Looked at in a practical way, Metcash was successful in its contention that Mr Jardin was in breach of his employment contract and in obtaining injunctions restraining those breaches. In that context, I do not think that Mr Jardin's cross-claim should be seen as a separate "event" for the purpose of an award of costs. The declaration sought by Mr Jardin was simply the converse of the declaration sought by Metcash. Metcash claimed that Mr Jardin was bound by the restraints in his employment deed until 1 March 2011 because the deed did not terminate until that time. Mr Jardin denied that allegation because he said that he was entitled to and did give 3 months' notice terminating the deed. That allegation was essentially a defence to Metcash's claim. Mr Jardin succeeded in that defence. However, in the context, I do not think that Mr Jardin should be regarded as having achieved partial success. Mr Jardin still resisted the injunctions sought by Metcash and not simply for a period after the 3 month notice period. He was unsuccessful in doing so and indeed the injunctions granted against him extended for a period beyond the 3 month notice period. Metcash was substantially successful, even if it did not get all it wanted. 10 On 12 August 2010, Mr Jardin offered to resolve the proceedings on the basis that he:

a Resign as a director of Jardim Investments; b Not accept or commence employment or engagement with Jardim Investments or SPAR Australia (or its related bodies corporate) before 1 November 2010; c Not hold or be interested in any investments which amount to more than 5 percent of the issued investments of any class of any one company before 1 November 2010. 11 Mr Neil's argument in relation to this offer involved three steps. First, he submitted that, so far as the period for which the undertakings were to operate is concerned, it was unreasonable of Metcash not to accept the offer, since Mr Jardin succeeded in his contention that he was entitled to terminate the employment deed on 3 months' notice and, at the time the offer was made, Metcash had not raised the possibility that it may be entitled to an injunction for a longer period of time on a spring board basis - and, indeed, did not do so until the issue was raised by the court during the final hearing. Second, Mr Neil submitted that the scope of the undertakings offered by Mr Jardin was not substantially narrower than the scope of the orders ultimately obtained by Metcash. Third, Mr Neil submitted that, as a result, Metcash did no better in the proceedings than it would have done if it had accepted the offer or at least it was unreasonable for it not to have accepted the offer when it was made with the result that, applying the principles in Calderbank v Calderbank [1975] 3 WLR 586, the court should make a more advantageous costs order in favour of Mr Jardin. That more advantageous order was an order that Metcash pay Mr Jardin's costs from the time the offer was made. 12 In my opinion, there are a number of problems with this argument. 13 First, at the time the offer was made, Metcash was seeking injunctions that operated until 1 March 2011 and ultimately it was successful in obtaining injunctions that went beyond the 3 month notice period. I do not think that the precise basis on which it sought the orders it did matters. What is important is the fact that it did better than the offer that was made by Mr Jardin. 14 Secondly, I do not accept that the scope of the orders obtained by Metcash was substantially the same as the scope of the undertakings offered by Mr Jardin. In his offer, Mr Jardin proposed that he would not accept or commence employment or engagement with Jardim Investments or SPAR Australia (or its related bodies corporate). The orders obtained by Metcash were substantially broader than that. They prevented Mr Jardin from taking any position as an employee, director or officer of SPAR Australia. However, they also prevented Mr Jardin from discussing the business of SPAR Australia with any person (apart from his legal advisors), competing with the business of Metcash and its related bodies corporate, soliciting customers or employees of Metcash for the benefit of SPAR Australia or any other competitor of Metcash and disclosing the contents of any documents held by him that belonged to Metcash. The orders also required Mr Jardin to return or to destroy documents he held belonging to Metcash. 15 Thirdly, in my opinion, Mr Neil's submissions were inclined to make the requirement of reasonableness a sufficient rather than a necessary condition for the operation of the principle established in Calderbank v Calderbank [1975] 3 WLR 586. In order for a party who has made a Calderbank offer to obtain a more favourable costs order that party must, as a result of the judgment, do better than or at least no worse than the offer it made. In addition, the party must establish that it was unreasonable of the other party to reject the offer at the time the offer was made: see, eg, Jones v Bradley (No 2) [2003] NSWCA 258. It is not sufficient for the party making the offer simply to establish that, on the facts known at that time, it was unreasonable of the offeree to reject the offer. In this case, it is clear that Metcash did substantially better than Mr Jardin's offer. For that reason alone, the principles in Calderbank v Calderbank do not apply; and it is not necessary to consider whether it was reasonable or not for Metcash to have rejected the offer at the time that it was made.

16 The position is not as clear in relation to Jardim Investments. The interlocutory injunction that Metcash obtained against Jardim Investments was one which prevented Jardim Investments investing in SPAR Australia. It failed to obtain an injunction in those terms at the final hearing. Metcash did, however, obtain other orders against Jardim Investments which it had resisted. Mr Zahra, who appeared for Jardim Investments, submitted that that relief was only ancillary to the principal relief - that is, the injunction preventing the investment. In those circumstances, he submitted that Jardim Investments was substantially successful and therefore should get all of its costs or at least a large proportion of them. Although in the principal judgment (see [2010] NSWSC 1096 at [30]) I described the orders that Metcash sought against Jardim Investments as "ancillary" to the injunction against investment, I did so in a brief summary of the case. I do not think that that summary should govern the issue of costs. Jardim Investment engaged and was threatening to engage in a number of other activities in connection with its investment which I found did involve a breach by it (as agent of Mr Jardin) of the employment deed. Those matters were significant and the evidence and submissions in relation to them took up a significant part of the hearing. Moreover, although Metcash did not obtain an injunction against investment in SPAR Australia, the terms on which Jardim Investments was permitted to make that investment were restricted and some of the activities which prompted the application for an interlocutory injunction - such as the proposal that Jardim Investments would play an active role in the affairs of SPAR Australia following the investment - were activities that were ultimately restrained by the injunctions that were granted. Consequently, I think that it is an over-simplification to say that Jardim Investments was ultimately wholly successful in relation to the activities that the interlocutory injunction was designed to stop. In those circumstances, I think that the appropriate order as between Jardim Investments and Metcash is that each party bear its own costs. In my opinion, that order fairly reflects the fact that Jardim Investments was successful in relation to an important issue in the case but that Metcash was also successful in obtaining significant orders against Jardim Investments. 17 The orders of the court are:

a The first defendant pay the plaintiffs' costs of the proceedings so far as they concern the plaintiffs and first defendant;

b There be no order for costs as between the plaintiffs and second defendant.

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