NSWNSWSC

NHB Enterprises Pty Ltd v Corry

[2020] NSWSC 1838

Supreme Court of NSW|2020-07-31|Before: Ward CJ

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2020-07-31

Before

Ward CJ

Catchwords

[1990] HCA 47 Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 Briginshaw v Briginshaw (1938) 60 CLR 336
[1938] HCA 34 Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 59 ALJR 842
[2013] HCA 46 Fox v Percy (2003) 214 CLR 118
[2009] NSWCA 278 Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300

Source

Original judgment source is linked above.

Catchwords

[1990] HCA 47 Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1 Briginshaw v Briginshaw (1938) 60 CLR 336[1938] HCA 34 Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 59 ALJR 842[2013] HCA 46 Fox v Percy (2003) 214 CLR 118[2009] NSWCA 278 Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300[2005] NSWCA 153 Levick v Commissioner of Taxation (2000) 102 FCR 155[2000] FCA 674 Myers v Elman [1940] AC 282 Nadarajapillai v Naderasa (No 2) [2015] NSWCA 209 NewellMuriniti v De Costi (2018) 97 NSWLR 398[2018] NSWCA 49 Orchard v South Eastern Electricity Board [1987] QB 565[1987] 1 All ER 95 Re Bendeich (No 2) (1994) 53 FCR 422 Re FelicityFM v Secretary, Department of Family and Community Services (No 4) [2015] NSWCA 19 Ridehalgh v Horsefield [1994] Ch 205[1994] 3 All ER 848 Riverlate Properties Ltd v Paul [1975] Ch 133[1974] 2 All ER 656 Saleh v Romanous (2010) 79 NSWLR 453[2010] NSWCA 274 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) (1999) 73 ALJR 306[1999] HCA 3 Taylor v Johnson (1983) 151 CLR 422

Judgment (88 paragraphs)

[1]

Background

The substantive proceeding in which the present application is brought is the second such proceeding to have been brought by the Applicants involving claims of breach by Mr Corry (who is not a party to the present notice of motion) of obligations in relation to the Applicants' alleged confidential information (in particular, information relating to certain pharmaceutical formulas).
The first proceeding (the 2017 Proceeding) was resolved by compromise between the parties without a hearing on the merits (at a time when judgment was reserved on an issue of privilege against self-incrimination in respect of certain items that had been obtained on the execution of search orders). The second proceeding (the current 2019 Proceeding) was commenced last year and arises out of complaints as to what transpired following the settlement of the 2017 Proceeding. In essence, it is alleged that certain of the Applicants' confidential information that was required to be returned to the Applicants or deleted had in fact been retained by one or more of the defendants and was continuing to be used in the second defendant's competing business. The claims in the 2019 Proceeding as against the defendants other than Mr Corry have now been settled (as will be explained in due course) with a substantial payment made, without admission, to the Applicants but with no order as to costs. Relevantly, those claims were settled prior to the discovery by the Applicants of some or all of the conduct here impugned.
The Respondents are two of the directors and principals of Geomat Consulting Pty Limited, which trades as Miller & Prince Lawyers (Miller & Prince). They were admitted to practice at different times in 2015. As at the time of the commencement of their involvement in the substantive proceedings (in February 2019), they had been practising as solicitors for about 3½ and 4 years, respectively. Reliance is placed by the Respondents in submissions on their relative inexperience at the time of the events in question (inconsistently, the Applicants say, with how they have portrayed themselves in their affidavits and on their firm website). In my opinion, this could only relevantly go to the issue of discretion as to any sanction for the impugned conduct, since the Respondents' obligations as legal practitioners in this regard do not depend on their level of experience at the time.
The Respondents initially commenced acting for the second defendant (Medicina Pty Limited, to which I will refer as Medicina) in the 2019 Proceeding on 19 February 2019. Later, they came also to act for the third to fifth defendants (who are the directors of Medicina other than Mr Corry - namely, Mr Ghaly, Mr Singh and Mr Goradia) in the 2019 Proceeding.
Although the Respondents did not, as I understand it, act at any stage for Mr Corry in his personal capacity, it will be seen from the chronology of events set out below that the Respondents were in regular receipt of communications and instructions from Mr Corry during the relevant period, those communications presumably being sent to them by Mr Corry in his capacity as a director of Medicina or as a party with a common interest to the Respondents' clients' claims. That has some relevance to the suggestion made in the course of submissions on the present application that it was not appropriate for the Respondents to disclose to the Applicants matters going to Mr Corry's conduct, he not being their client.

[2]

Present application

The relevant events occurring in relation to the substantive proceeding are set out in the chronology of events below. As to the present application, on 8 October 2019, the Applicants filed and served Points of Claim, setting out the relevant background to, and basis for, the relief they now seek.
In summary, the Applicants allege that they have incurred unnecessary or wasted costs as a result of the Respondents' conduct in: breaching the Undertaking; failing to conduct a competent investigation into the circumstances in which the Password was provided by them to Mr Corry in breach of the Undertaking and falsely asserting that they were not responsible therefor; failing to disclose their knowledge to the Court or the Applicants that Mr Corry had accessed the Dynamics Account, the existence of the Second Corry Email Account, and as to the use of the Second Corry Email Account by Mr Corry (including for the purpose of monitoring the Applicants' access and review of the Dynamics Account); and failing to disclose their knowledge to the Court or the Applicants that documents had been deleted from the Dynamics Account, and misleading the Court and the Applicants by failing to disclose that knowledge in correspondence and in preparing, filing and serving the affidavits ordered to be served by Kunc J in May 2019 after the issue of disruption to the Dynamics Account had been raised (the May Affidavits, as to which see below).
The allegations of serious misconduct, neglect or incompetence, within the meaning of s 99 of the Civil Procedure Act, as articulated in the Points of Claim, are as follows.

[3]

(i) Breaches of Undertaking (Points of Claim [76]-[78])

It is common ground that there were breaches by both Respondents of the Undertaking (see below) by the provision to the defendants of the Password (Mr Corry's password to what has been referred to as the First Corry Email Account). The breaches occurred in the same way, namely by communications to the defendants, including Mr Corry, in which there was embedded an email chain containing an email which disclosed the Password.
Although in their Points of Claim it is alleged by the Applicants that, if deliberate, that conduct amounted to serious misconduct, it is here accepted by the Applicants that the breaches were inadvertent; and the contention now is simply that that conduct amounted to serious neglect or serious incompetence. Furthermore, although the Respondents have raised a pleading issue (i.e., that the Points of Claim plead only the breach of Undertaking by the First Respondent sending an email on 15 March 2019 which contained the Password - see at [27] of the Points of Claim - that being the first breach of the Undertaking), the Applicants contend that the Respondents were on notice of the allegation that there was a further breach by the Second Respondent in the sending of what is referred to below as the Further Breach Email (and they note that the sending of this Further Breach Email has been admitted by the Respondents).

[4]

(ii) Failure to disclose breach of the Undertaking by provision of the Password (Points of Claim [79]-[81])

The complaint here made is that, on and from about 24 April 2019, despite having investigated matters raised by the Applicants in their 23 April 2019 letter, the Respondents: falsely confirmed that no one from Miller & Prince had provided the Password to the defendants (defined as the False Assertion) (see 50); repeated the False Assertion on 30 April 2019 (see 60); and did not disclose the falsity of the False Assertion to the Court or to the Applicants during the course of the proceeding.
The Applicants contend that, if the Respondents made and repeated the False Assertion knowing it to be false as a result of their investigations, then that conduct amounted to serious misconduct; and, if they did so without knowing it to be false despite their investigations, then that conduct amounted to serious neglect or serious incompetence.

[5]

(iii) Failure to disclose Second Corry Email Account (Points of Claim [82]-[84])

The next complaint (chronologically arising at an earlier point in time to the previous complaint) is that, on and from 11 April 2019, the Respondents: knew that the First Respondent had accessed the Dynamics Account; knew of the existence of the Second Corry Email Account; knew of the use of the Second Corry Email Account by Mr Corry including for the purpose of monitoring the Applicants' access and review of the Dynamics Account; and did not disclose that knowledge to the Court or the Applicants during the course of the proceedings. It is asserted that the Respondents were obliged as officers of the Court to disclose to the Court and the Applicants their knowledge of those matters.
The Applicants say that, when the Respondents realised that Mr Corry had access to the Dynamics Account (contrary, they say, to the regime which had been put in place by the Court's orders on and from 21 February 2019, and then 14 March 2019) and that Mr Corry was using his access to monitor the Applicants' review of the Dynamics Platform, the Respondents should immediately have disclosed both of these matters to the Applicants. In oral submissions it was accepted that, if the Respondents had the state of mind that there was nothing wrong with Mr Corry accessing the Dynamics Platform (a proposition with which the Applicants nevertheless cavil), then there would be no requirement for the Respondents to disclose that Mr Corry did have that access (see 17/7/20 at T 18.7), though the Applicants say that this would not address the complaint as to the non-disclosure of Mr Corry's review of the Applicants' access to the Dynamics Account.
Again, the Applicants contend that, if that conduct was deliberate (and they maintain that it is open to conclude that the Respondents did consciously conceal these matters), then it amounted to serious misconduct; and that, if inadvertent, then it amounted to serious neglect or serious incompetence.

[6]

(iv) Failure to disclose the deletion of documents (Points of Claim [85]-[87])

The complaint here made is that, on and from about 24 April 2019, the Respondents: knew that documents had been deleted from the Dynamics Account (as a result of the receipt of an email from Mr Corry of that date in which reference is made to "deletion" of records); did not disclose that knowledge to the Court or the Applicants during the course of the proceedings; and misled the Court and the Applicants by failing to disclose that knowledge and by preparing, filing and serving the May Affidavits (see below).
Again, it is contended that, if deliberate, that conduct amounted to serious misconduct; and, if inadvertent, that conduct amounted to serious neglect or serious incompetence.

[7]

Applicants to be held to their pleaded case

I interpose here to note (as adverted to above) that the Respondents insist that the Applicants should be held to their "pleaded" case. Leaving aside the complaint that there was only one breach of the Undertaking that was the subject of an allegation in the Points of Claim, the Respondents say that it is not part of the Applicants' pleaded case on this application that the Respondents were subject to "some duty to educate" the Applicants about how the "Dynamics Account" (which I will consider in some more detail shortly) operated, how it was used in connection with the Medicina business or the identity of the different users who accessed that system on a regular basis; nor that the Respondents had some duty to assist the Applicants to formulate orders they sought against the defendants.
The Applicants do not accept that they are here seeking to expand the case as "pleaded" in the Points of Claim. Nor did I understand the Applicants' submissions as seeking to formulate some novel duty to educate one's opponent in litigation (hard-fought or otherwise as the litigation may be). Rather, as I apprehend it, the complaint made as to non-disclosure of various matters (and in particular non-disclosure of Mr Corry's monitoring of the Applicants' review of documents on the Dynamics Account) is put on the basis of duties owed by solicitors as part of their professional obligations and more generally their obligation to assist in the administration of justice (as to which I will say more in due course).

[8]

Consequences of the impugned conduct

The unnecessary or wasted costs said to have been incurred by the Applicants as a result of the impugned conduct are set out at [88]-[90] of the Points of Claim and in an affidavit affirmed on 4 October 2019 by the Applicants' solicitor, Mr Neil Wallman of HWL Ebsworth (HWLE) (the Wallman Costs Affidavit); and are as follows.
First, that the Applicants reviewed the Dynamics Account in the period from 22 March 2019 to 23 April 2019 in circumstances where they say that, had they known: that Mr Corry had created the Second Corry Email Account on 28 February 2019; that the Respondents had breached the Undertaking by providing the Password to Mr Corry; that Mr Corry had set up "Notification Alerts" (see below); and that the Respondents were also receiving those Notification Alerts; they would instead have taken immediate steps to cease that review and to relist the proceedings. (Pausing here, having regard to the history of the interlocutory stoushes in this matter there seems little reason to doubt that, had the Applicants known at an earlier time of the matters that they say the Respondents should have disclosed, then they would indeed have taken action of the kind to which Mr Wallman has deposed.) The Applicants say, in effect, that by reason of the Respondents' conduct they were either uninformed or misinformed about the true circumstances pertaining at the time.
Second, that the Applicants were required to take the steps they did on and from 23 April 2019 (when their access to documents in the Dynamics Account was disrupted and they ceased their review) to 5 June 2019 to investigate and interrogate the cause of that disruption. It is said that they were prevented by the Respondents from properly understanding the true position, and that the Respondents' conduct deprived them of the opportunity to relist the proceedings on a properly informed basis (referring to Mr Wallman's evidence on 7/4/20 at T 15.30-32; 16.41-43; 17.4-9).
Third, that the Applicants are no longer able to prosecute their case against Mr Corry for use and exploitation of the relevant information without conducting a review of the Dynamics Account afresh (which they maintain cannot be done with any certainty in any event). Complaint is made that the imaged version of the Dynamics Account created by the Independent Computer Expert is unintelligible and cannot now be meaningfully reviewed (see Mr Wallman's affidavit affirmed 12 August 2019 at [97]; his evidence on 6/4/20 at T 32.45-33.21; and Mr Wallman's affidavit affirmed 16 May 2019); and that the Applicants can thus now have no certainty that the contents of the Dynamics Platform accurately reflect the contents of the platform as it was at the date of the execution of the Search Order (pointing to uncertainty as to the fact or extent of the deletion of records; whether documents such as sale records record the true position of Medicina in relation to sales and revenue; and the fact and extent of the deletion of any other records).

[9]

Points of Defence

In response to the Points of Claim, the Respondents filed and served Points of Defence on 21 November 2019.
In the Points of Defence, the Respondents admit to having breached the Undertaking (see Points of Defence at 27; Mr Gerges' affidavit sworn 10 January 2020 at [17], and Mr Athanassios' affidavit sworn 10 January 2020 at [15]). The Respondents contend that: the breach was inadvertent (which the Applicants now accept), the Password having been sent to Mr Corry as part of a lengthy email chain (Points of Defence at 27); and (which the Applicants do not accept) that the breach was of no consequence because by then Mr Corry had already created the "Second Corry Email Account" and obtained access to the Dynamics Account on 28 February 2019 (Points of Defence at 27).
The Respondents admit that they received from Mr Corry the emails on 22 and 26 February 2019 enquiring as to when he could access his email account related to the First Corry Email Account and the Dynamics Account (see Points of Defence at [18]-[19]). The Respondents further admit receiving the emails in relation to the Notification Alerts (Points of Defence at 35). As to the existence of the Second Corry Email Account, the Respondents contend that: the Applicants were aware of the existence of the legal_ac@nexgenpharma email account from at least 26 February 2019; that the legal_ac@nexgenpharma account was one of the aliases of the Second Corry Email Account; and that the Second Corry Email Account was a "global administrator" account with broad access to the Dynamics Account (see Points of Defence at 35-(d)). (The Applicants accept that they were aware of the existence of this email account but they point out that it was not linked to the Dynamics Account until 28 February 2019 - see 17/7/20 at T 51.39 - and they say that they did not know that the Second Corry Email Account was one to which global administrator access was attached.)
The Respondents' position is that they undertook a competent investigation in April 2019 as to the complaints made by the Applicants (see Points of Defence at 42). They admit that they did not disclose all the matters of which complaint is here made (but do not accept an obligation to make the disclosures the subject of the present complaint) (see Points of Defence at [67]-]70]). The Respondents admit that the May Affidavits do not refer to the 24 April 2019 email or to the bulk deletion of records (see Points of Defence at -(b)). The Respondents do, however, point to the fact that the two affidavits affirmed by Mr Ghaly did refer to the deletion of documents (Points of Defence at ).

[10]

Relevant legal principles

Before turning to the chronology of events, it is convenient to set out the relevant principles that apply on an application pursuant to s 99 of the Civil Procedure Act (which were not here in dispute).
Section 99 of Civil Procedure Act provides, relevantly, that: 99 Liability of legal practitioner for unnecessary costs (1) This section applies if it appears to the court that costs have been incurred - (a) by the serious neglect, serious incompetence or serious misconduct of a legal practitioner, or (b) improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible. (2) After giving the legal practitioner a reasonable opportunity to be heard, the court may do any one or more of the following - (a) it may, by order, disallow the whole or any part of the costs in the proceedings - … (ii) in the case of a solicitor, as between the solicitor and the client, (b) it may, by order, direct the legal practitioner - … (ii) in the case of a solicitor, to pay to the client the whole or any part of any costs that the client has been ordered to pay to any other person, whether or not the client has paid those costs, (c) it may, by order, direct the legal practitioner to indemnify any party (other than the client) against costs payable by that party. (3) Before making such an order, the court may refer the matter to a costs assessor (within the meaning of Part 7 of the Legal Profession Uniform Law Application Act 2014) for inquiry and report. …
It should also be remembered that there remains an inherent jurisdiction of the Court to make orders that a legal representative personally pay the opposing party's costs directly for unnecessary or wasted costs, that power arising out of the Court's supervisory jurisdiction with respect to legal practitioners admitted by the Court (see Re Felicity; FM v Secretary, Department of Family and Community Services (No 4) [2015] NSWCA 19 (Re Felicity) at [20], per Basten JA, with whom Emmett JA and I agreed). Section 99 of the Civil Procedure Act does not confine that inherent or supervisory jurisdiction.
Before making a costs order under s 99 of the Civil Procedure Act, the legal practitioner must be given a reasonable opportunity to be heard (s 99(2) of the Civil Procedure Act extracted above; and see the provisions of Practice Note SC Gen 5 (Costs orders against legal practitioners)). The same principle applies where the application is in the inherent jurisdiction of the Court.

[11]

Microsoft Dynamics 365 Account

It is convenient at this stage to describe the so-called "Dynamics Account", not least because the Respondents say that there is a fundamental misconception underlying the Applicants' case that derives from the imprecise usage of the term "Dynamics Account". Indeed, I consider that much of the explanation for the current state of affairs lies in the apparent disconformity between the respective practitioners as to their understanding of precisely how the Dynamics Account operated and how access was able to be gained thereto.
Broadly speaking, the Microsoft Dynamics 365 system (or platform) is a "cloud-based" (or web-based) information and document management system in respect of which Medicina has an account (the Dynamics Account). The orders made by Kunc J are in the terms of the "Dynamics Account", but I do not understand there to be any relevant distinction in terminology between reference to the "Dynamics Account" and the "Dynamics Account", nor for that matter that there is any distinction between reference to the Dynamic's "Account" and the Dynamics "platform". (The terms Dynamics Account and Dynamics Platform are used interchangeably in these reasons.)
The Microsoft Business 365 Account, by contrast, is a reference to the system in respect of which individual Microsoft email accounts are operated by staff at Medicina.
Medicina uses the Dynamics Account in the conduct of its business to store information including formulas, client orders, sales and financial records, file notes of telephone discussions with clients, and materials relating to marketing, online sales and staff management. Access to the Dynamics Account is via a user's username, being the user's office email address. Relevantly, there appear to be different levels of access to the Dynamics Account within the Medicina organisation (the highest level being that of "global administrator", that being the level of access that Mr Corry had to the Dynamics Account both through the First Corry Email Account and, later, the Second Corry Email Account (see Mr Gerges' cross-examination on 7/4/20 at T 100.4 and T 102.47), though it is not clear that this was appreciated by all (or any) of the respective legal practitioners at the relevant time(s). The Second Respondent's evidence, at least initially, was that he was aware that Mr Corry had "full access" through the Second Corry Email Account

[12]

Chronology of events

I turn now to the chronology of events, indicating throughout (in order to put the dispute in context) the differing construction put on various of the events by the respective parties.

[13]

2017 Proceeding

As noted above, the background to the present application may be traced back to 2017 when proceedings were commenced in this Court by the Applicants against a number of defendants; including, relevantly, Mr Corry, Medicina, and Mr Ghaly. The Second Respondent acted for Mr Ghaly in the 2017 Proceeding.
In the 2017 Proceeding, the Applicants alleged misuse of their confidential documents and information. The Applicants obtained and executed a search order (the independent solicitor and independent computer expert appointed on that occasion being the same as those who were later again appointed as independent solicitor and independent computer expert in the subsequent 2019 Proceeding).
The Respondents say that the electronic documents seized and reviewed on that occasion must have included the Dynamics Account, and that it may be inferred that the Applicants and the Independent Computer Expert had some familiarity with Medicina's Dynamics Account and the way in which it was accessed and operated prior to the 2019 Proceeding. Pausing here, I do not know that such an inference can properly be drawn, at least insofar as it relates to the Applicants' knowledge; not least because the 2017 Proceeding was settled at a time when, as I recall, issues of privilege had been raised and were the subject of a hearing on which judgment had been reserved. It is not clear to me what documents, if any, had been accessed by the Applicants by the time of settlement of the 2017 Proceeding; nor the extent of any examination by the Independent Computer Expert of the seized documents or computer systems at the time; and it is not appropriate to speculate thereon.
The 2017 Proceeding was settled in February 2018 and orders were made by consent on 16 April 2018 which, inter alia, required the defendants to those proceedings to deliver up certain software and documents, and for the defendants to be restrained from certain conduct.

[14]

Commencement of 2019 Proceeding and the Search Order

On 18 February 2019, the 2019 Proceeding was commenced, on an ex parte basis, by the Applicants against Mr Corry and Medicina. On that day, Kunc J made search orders, addressed to both Mr Corry and Medicina, permitting a search to be carried out at Mr Corry's home and at the offices of Medicina (Search Order).
Paragraph 8 of the Search Order required members of the search party to be permitted (subject to paragraphs 10-20 of the Search Order) to enter the premises so that they could carry out the search and other activities referred to in the Search Order.
Paragraph 9 of the Search Order obliged Mr Corry and Medicina, having permitted members of the search party to enter the premises, to do certain things, including: to permit the members of the search party to search for, to inspect, and to make copies of, the listed things (sub-para (b)) which were defined in Schedule A of the Search Order. The listed things, as defined, included (at item 8): "Medicina Pty Ltd's Microsoft Dynamics 365 software".
Paragraph 9(e) of the Search Order obliged Mr Corry and Medicina to do all things necessary to enable the members of the search party to access the listed things, including "providing them with all necessary passwords and providing them with access to all email accounts".

[15]

Execution of Search Order on 19 February 2019

The Search Order was executed on 19 February 2019 (see Mr Wallman's affidavit affirmed 12 August 2019 at [14]-[15]) by a search party that included an independent solicitor (Mr Jeremy Mackenzie of Mills Oakley) (the Independent Solicitor) and an independent computer expert (Ms Leanne Balit of Klein & Co) (the Independent Computer Expert).
The Independent Computer Expert subsequently reported (see her report dated 21 February 2019) that, during the execution of the Search Order (at which time various laptops, phones and other computer devices were seized) Mr Corry "provided passwords for the following online accounts" (which were described by the Independent Computer Expert as a "Microsoft Office 365 business account" and a "Microsoft Office Dynamics Account"). The Independent Computer Expert noted that for each of those accounts, Mr Corry provided the same login name (to which I will refer as the "alex@nexgenpharma" login or the First Corry Email Account) (see Mr Wallman's affidavit affirmed 12 August 2019 at [21]-[23]).
The Applicants say that the purpose of Mr Corry being required to provide his username and password to the Independent Computer Expert was to enable the Independent Computer Expert to change the password to ensure that the "accounts" (i.e., as I understand it, both the Dynamics Account and the office email account or Business Account) were not tampered with, while those accounts were downloaded offsite.
The Independent Computer Expert advised Mr Corry "that we will take control of the above accounts onsite and then download the contents of these online accounts from our offices", to which it is said Mr Corry agreed; and it is noted that Mr Corry advised that "the data collected from these online accounts was also to be marked as privileged and segregated from the other forensic copies".
Complaint has been made by the Applicants about a number of things that occurred during the execution of the Search Order (and indeed there have been separate contempt proceedings in this Court against both Mr Corry and his wife in relation thereto). Suffice it here to note that the matters of which complaint has been made include: that Mrs Corry had informed her husband in advance of the Search Order; that without disclosing his presence Mr Corry had been on a telephone line during a conversation between the Independent Solicitor and the Second Respondent; and that Mr Ghaly had removed documents from the business premises of Medicina and transported them to a mechanics workshop nearby (see the Independent Solicitor's report at [30]-[33]; [59]-[67]).

[16]

Request for access by Mr Corry

On 20 February 2019, according to the Independent Computer Expert, Mr Corry contacted her requesting access to "his Microsoft Office 365 business account". That request was refused (see p 7 of the Independent Computer Expert's report). Relevantly, the Independent Computer Expert records that she was instructed by the Independent Solicitor (who was instructed by Mr Wallman) that "the control of the accounts not be provided until [the Independent Computer Expert] had finished downloading the contents of both online accounts". (I Interpose to note that it seems clear from this that the Applicants must have understood that Mr Corry's login to the First Corry Email Account was his only means of access to "both online accounts" - i.e., both Mr Corry's Microsoft Office 365 email account and the Dynamics Account.)
Also on 20 February 2019, the download of the Dynamics Account was commenced by a computer analyst in the Independent Computer Expert's office (Mr Jay Banerji).

[17]

21 February 2019 - disruption to downloading of Dynamics Account

On 21 February 2019, the Second Respondent filed a notice of appearance on behalf of Medicina in the 2019 Proceeding.
On the same day, when Mr Banerji attempted to log into the Dynamics Account (using the password provided by Mr Corry for the First Corry Email Account) to complete the download of the Dynamics Account, he was unable to do so. The password to the First Corry Email Account was found to have been changed, with the result that the Independent Computer Expert no longer had access to the Dynamics Account (see p 7 of the Independent Computer Expert's report; Mr Wallman's affidavit affirmed 12 August 2019 at [24]-[25]).
The Applicants' position (with which the Respondents do not appear to cavil) is that it is more likely than not that the password to the First Corry Email Account had been changed by Mr Corry. The Applicants assert (and Medicina admits) that, as at 21 February 2019, the Respondents had no reason to believe that any of the other defendants had changed the password, and that the Respondents knew that it was more likely than not that the password was changed by Mr Corry (see Points of Claim at [15], Points of Defence at 15). The Applicants say that the Respondents' position as to the trust or reliance that could be reposed in Mr Corry's assertions - such as his assertions in relation to the access to the Dynamics Account - is inconsistent with their knowledge or suspicion of what Mr Corry had done already in connection with the search orders. Indeed, the Applicants go so far as to describe Mr Corry as a "dangerous and unreliable" person; and they suggest that it is implausible that the Respondents could have accepted his word at face value.

[18]

21 February 2019 directions hearing

The Applicants then sought for the matter to be re-listed before Kunc J on 21 February 2019. On that occasion, Counsel appeared on behalf of Medicina, instructed by the Second Respondent. Mr Corry did not appear at the directions hearing. The Independent Computer Expert's report had been served only just prior to the directions hearing; and the Respondents had therefore had little (if any) opportunity to consider its contents. The First Respondent did not attend that directions hearing.
Senior Counsel appearing for the Applicants informed his Honour that: One difficulty that has arisen, as I understand it, overnight, is that the independent solicitor who has been accessing devices, software and cloud storage as part of what she is required to do under the search order, has had her access to some of that materials impeded by a change of password which has taken place overnight. I understand the specific cloud storage that has been changed is the Microsoft 365 Dynamics cloud storage which was the subject of a specific order in the search order. What we are told by the independent computer expert is that only the defendants or their IT provider would have had the ability to change the password. What's happened is that since the search order has been examined by the independent computer expert, halfway through her access to that cloud storage she has now been locked out. One of the orders that we are seeking today to ensure the search order can be properly effected and carried out is that the defendants are directed to provide the relevant passwords and be restrained from making any further changes to any relevant passwords …
The Applicants point to the submission made on that occasion on their behalf to the effect that "as long as the material remains with the [Independent Computer Expert], there is no prejudice", and that the status quo was preserved by "no access to any of this material by the defendants" (see 21/2/2019 at T 3.44-45; T 5.9-10). (Pausing here, this seems to me inconsistent with any understanding, on the part of the Applicants at least, that the defendants, who included Medicina and hence its employees, could have access to the Dynamics Account while the material 'remained' with the Independent Computer Expert.)
Kunc J on that occasion made orders which included that the defendants were to provide "any passwords requested by the Independent Computer Expert in respect of any device, software, or cloud storage removed or imaged in the execution of the Search Order", and that the defendants were restrained from "changing or causing to be changed any password for any device, software, or cloud storage removed or imaged in the execution of the Search Order" (see orders 3-4 of the 21 February 2019 Orders). His Honour also ordered that: 6. The first and second defendants are to provide to the Independent Computer Expert by 7.00pm today all passwords to the Microsoft 365 Dynamics Account referred to on page 7 of the Independent [C]omputer Expert's report, in writing by the Second Defendant [Medicina]'s solicitor to the Independent Solicitor.

[19]

Provision of Password on 21 February 2019

Returning to the chronology of events, on 21 February 2019 the Second Respondent (no doubt to comply with order 6 of the 21 February 2019 Orders) asked Mr Corry, by email copied to Mr Ghaly, Mr Goradia and Mr Singh, for "the passwords for the Microsoft 365 Dynamics" (my emphasis; thus seemingly contemplating that there might be more than one). Mr Corry responded, just before 7:00pm, providing one password. The Second Respondent shortly after sent an email to the Independent Solicitor, advising that, in accordance with order 6 of the orders made by Kunc J that day, "I am instructed that the password to the Microsoft 365 Dynamic account is …" (again, my emphasis); and stating that: The First Defendant [Mr Corry] has requested that this password not be changed as he will be defined [sic; scil denied] access to contact legal representatives and prepare a defence for the matter.
The Respondents say that the 21 February 2019 email from the Second Respondent to the Independent Solicitor is important as it made no secret of the fact that Mr Corry was still accessing the Dynamics Account and would continue to require access (hence the request that the password not be changed). I am not persuaded that this conclusion follows. It says nothing about Mr Corry's actual access at that time, and in my opinion it must have conveyed to the reasonable reader that Mr Corry needed the password in order to be able to access the account (or accounts) to which the password provided access (noting that the password provided was said to be to the Microsoft 365 Dynamics Account) (and that without that password he would not have the required access).
Insofar as this email conveyed (as I think it clearly does) that, without the password, Mr Corry would not have access to whatever accounts he needed to contact his legal representatives and to prepare a defence for the matter (the latter surely including the Dynamics Account, since that was where the alleged confidential information would, on any view of things, most likely have reposed, as it comprised pharmaceutical formulas of the kind that were typically located on the Dynamics Platform), it is inconsistent with there being multiple "gateways" or "keys" to the Dynamics Account (because if there were multiple gateways it would have been open to Mr Corry at any time, as in fact happened, to use or create a different email account to access the Dynamics Account).

[20]

22 February 2019

On 22 February 2019 at 12:06pm, the Applicants' solicitors, HWLE, wrote to the Second Respondent at Miller & Prince, stating, inter alia: At some time between 20 February 2019 and 21 February 2019, the password for the Microsoft Office 365 was subsequently changed, in an apparent attempt to frustrate the orders made by Justice Kunc on 18 February 2019. Such changes appear to have been made by the First Defendant [Mr Corry]. In the circumstances, we intend upon seeking for the Independent Computer Expert to change the password for the Microsoft Dynamic 365 software so that the status quo of the Search Order can be maintained.
At 5:03pm on 22 February 2019, a solicitor in the Independent Solicitor's office sent an email to the Second Respondent and others stating that: Microsoft 365 Account Password Additionally, we advise that the ICE [Independent Computer Expert] has changed the Microsoft 365 account password this afternoon, at the request of the Plaintiffs' solicitors, in order to secure the account until the ICE has completed downloading Dynamics. [Emphasis added]
It is clear from the exchange of emails on 22 February 2019 that the Independent Solicitor appears to have considered that change of the password would "secure" the Dynamics Account; and it seems likely from this that the Applicants would have understood that this would prevent Mr Corry from accessing the First Corry Email Account and the Dynamics Account (as has been alleged in the Points of Claim at [17]). This is not consistent in my opinion with the Applicants having an understanding at the time that there were multiple passwords that would have permitted access to the Dynamics Account (whatever may have been the Respondents' understanding at the time).
Meanwhile, on around 22 February 2019, the First Respondent took over carriage of the review of electronic documents to determine which documents were privileged (see Mr Gerges' affidavit of 10 February 2020 at [24]).

[21]

25 February 2019 email from Mr Corry requesting password

On 25 February 2019 at 10:02pm, Mr Corry sent an email to the Second Respondent (from a different email address to which I will refer as the "the legal_ac@nexgenpharma" login or email address) stating: Tomorrow I REALLY need you to jump on getting my email account back up. I will be following it up tomorrow with Frank. But this is a company email company issue and we NEED it operational to firm up the Brett response. [The Brett response, as I understand it, is a reference to an unrelated matter involving a statutory demand served on Medicina by a former employee of the company - see Mr Athanassios' affidavit sworn 10 January 2020 at [56]; and Mr Gerges' affidavit sworn 10 January 2020 at [20].]
The 25 February 2019 email from Mr Corry is unclear as to the account or accounts to which he was insisting he required access. It refers to his "email account back up", which would be consistent with Mr Corry needing to be provided with a password to access his personal or business email accounts. However, it seems inherently more likely that documents required in order to respond to a statutory demand (at least insofar as they comprised invoices or the like) would have been located on the Dynamics Account. In any event, it must have conveyed to a reasonable reader in the position of the Second Respondent that there was some "company issue" to do with Medicina's business that necessitated Mr Corry being provided with access to his email account; and that he did not at that time have access to whatever account was necessary for him to deal with a matter involving the operation of the Medicina business. The use of capitals in the email can only be understood as a matter of emphasis (or agitation) on Mr Corry's part.
On 26 February 2019 at 10:16am, the Second Respondent responded to the above email, in an email copied to the other directors of Medicina, stating: Hi Alex - as per the attached email, the ICE has not finalised the downloading of the Microsoft Dynamics. They will be providing me an update today in respect of when they propose to finalise the download of the Microsoft Dynamics. Based on the attached email, once they've finalised the download of the Microsoft Dynamics, we should have access to the account. … [Emphasis added]
Pausing here, the last sentence of this email (insofar as it is responding to Mr Corry's seemingly agitated demand for the Second Respondent to "jump on getting my email account back up") seems to link access to the "email account" to the status of the download of the Dynamics Account. This suggests that it was the Second Respondent's understanding that, absent access to the "account" (i.e., his password to the First Corry Email Account) Mr Corry could not access the Dynamics Account (consistent with what seems to have been the Applicants' understanding and inconsistent with the proposition now put by the Respondents that everyone should have realised that at all times Mr Corry has had access to the Dynamics Account).

[22]

Provision of password

On 27 February 2019 at 1:48pm, the Independent Computer Expert sent an email to, among others, the Second Respondent (addressed among other email addresses to the legal_ac@nexgenpharma email address, which was not, it seems, at that stage linked to the Dynamics Account), advising that: We have finished downloading the data from the Microsoft Dynamics Account and can arrange for the drive to be delivered to Mills Oakley … We are also ready to provide the password back to Mr. Corry in order for him to access his account. Can we please be provided with his mobile number, in order for me to text the password to him?
At 1:50pm that day, the Second Respondent emailed Mr Corry (at the legal_ac@nexgenpharma email address) and the other directors of Medicina, stating that: Alex - see attached. They have completed the download. They will be texting you the password. What your number?
At 2:00pm that day, Mr Wallman (of HWLE) sent an email to the Independent Computer Expert and others (including to "Alex Corry", and to the legal_ac@nexgenpharma email address - which as I understand it had not yet been linked to the Dynamics Account), responding to the 1:48pm email from the Independent Computer Expert (see above), stating: Consistent with the Orders of 21 February 2019, we ask that you do not provide the password to the defendants. To the extent that the Orders of 21 February 2019 are varied, we will notify you immediately.
Tellingly, in my opinion, Mr Corry's response to this, sent by email to the Second Respondent at 2:03pm (from the legal_ac@nexgenpharma email account), was "Wtf??!!!". (The Respondents admit that Mr Corry's response was as alleged - see Points of Defence at [20].) This reaction on its face appears to be inconsistent with Mr Corry at that stage being able to have access to the account (or accounts) accessible via the First Corry Email Account (since it is difficult to see why he would be so frustrated if he had been able, at all times, to have access to his accounts). Although I accept that it might be consistent with Mr Corry being frustrated at being disbarred only from access to his personal email account (which, as I understand it, is how the Respondents argue that this communication should be read), and not from the Dynamics Account as such; it is surely not coincidental that Mr Corry's next step (see below) was to set up the link to the Second Corry Email Account which did have access to the Dynamics Account (and it does not appear that thereafter Mr Corry was agitating for the return of access through the First Corry Email Account).

[23]

27 February 2019

At 7:46pm on 27 February 2019, the Second Respondent sent an email addressed to Mr Corry's "legal_ac@nexgenpharma" email address and to Mr Ghaly and Mr Goradia. The email (marked as having high importance) is said by the Applicants to be fatal to the Respondents construction argument and current position as to their understanding at the relevant time. Relevantly, it contained the following: Prohibitions of access to material Alex, I understand that you do not agree that they are entitled to maintain the password to the Microsoft Dynamics Accounts. The prima facie evidence in respect of the Microsoft Dynamics Accounts is that the cloud solution contains information which ought to have been delivered up as part of the prior proceedings. That is the position contended for by the Plaintiff and it is on that basis that they are insisting on the information being stored with the independent solicitor rather than being returned to the relevant defendants (see order 2 of the 21 Feb 2019 orders). The Barrister [Mr Mirzai] and I discussed this today and to be completely frank, it does not at all assist the defendants that during the course of executing the search order, the password to the account was changed by the only person who could have had access to it. If nothing else, that conduct would support the drawing of an available inference that there is information within the cloud account that the NexGen (and its stakeholders) ought not to have had access to. The Barrister's view is it would be difficult for NexGen (and its stakeholders) to insist on having access to the material until the material issues in dispute in this case have been determined.
The email canvassed the possibility of seeking an undertaking to be proffered by the Applicants as to loss and damage caused by the imposition of the "restraint of the information"; but said that "there is absolutely no point in doing so if the reality is that the information that has been confiscated contains the very thing the Plaintiffs suspect it contains". The email also stated: Should the material returned back to the Defendants The reason why there is now very little scope (and in our view - no tenable scope) for an argument that the material ought to be returned is because of the conduct of the certain defendants alluded to above (in addition to their initial attempts to dispose of or hide material - and in addition to the circumstances of having settled the initial proceedings). Because the property is not to be returned to the persons from whom it was seized, namely - the Defendants, there would be no basis for access to the password to be provided to the Defendants.

[24]

Privilege Review

In the period from 28 February 2019 to 8 March 2019, solicitors from Miller & Prince conducted a review of the electronic documents to identify documents potentially subject to a claim for privilege (see Mr Athanassios' affidavit sworn 10 January 2020 at [58]-[80]; Mr Gerges' affidavit of 10 January 2020 at [27]-[42]).
It appears that the Respondents encountered various practical difficulties in the privilege review process (as described in the affidavit references above). One of those practical difficulties related to access to the imaged versions of the devices and the Dynamics Platform, which was apparently not only technically onerous but also very costly (including because specialist software was required to access and navigate those imaged versions). Indeed, as it ultimately transpired, it appears that had an attempt been made to carry out the privilege review on the imaged version of the Dynamics Platform, it would have been unworkable in any event - as explained in Mr Wallman's affidavit affirmed16 May 2019 - since it appears as an unintelligible source code.
By letter dated 6 March 2019, the Second Respondent raised these concerns with the Applicants' solicitors and proposed certain changes to the regime established by the 21 February 2019 Orders: first, to extend time for the privilege review; second, to conduct the privilege review on the devices themselves and on the live Dynamics Platform; and, third, to transfer the control of the devices and the Dynamics Platform from the Independent Solicitor to the Respondents' firm.
The Second Respondent relevantly offered an undertaking at that time not to permit any third party access to any of the information on the devices or the Dynamics Platform "without being in the presence of a legal representative". Pausing here, it is difficult to square the proffering of such an undertaking with the Second Respondent having an understanding at that time that there were numerous users who already had unfettered access to the Dynamics Platform (and there is force to the Applicants' submission that if that was indeed the Respondents' understanding at the time then the undertaking would have been impossible to honour). However, as I understand it, the Respondents' response to this is, again, to contend that their understanding was that all that was restricted was access through Mr Corry's individual and unique login - the First Corry Email Account.

[25]

Access to the Dynamics Account by Mr Corry re Notification Alerts

Meanwhile, from around 28 February 2019, Mr Corry accessed the Dynamics Account to set up a Notification Protocol - i.e., an alert system so that he would receive notifications to the Second Corry Email Account as to when documents were reviewed by the Applicants using access via the First Corry Email Account (see Points of Claim at [31]) (Notification Alerts). There are copies in evidence of numerous such Notification Alerts in the period from at least 3 April 2019 to 3 June 2019. However, it is not established that the Respondents were aware of this prior to the 14 March 2019 directions hearing (see below). Indeed the Respondents do not appear to have been forwarded a Notification Alert until 11 April 2019 (the relevance of that date being that it is the first alternative date from which the wasted costs order is claimed).

[26]

14 March 2019 directions hearing

The matter came back before Kunc J on 14 March 2019. On that occasion the Applicants were represented by Counsel at the directions hearing, as was Mr Corry. Medicina was represented by the Second Respondent.
The Respondents place emphasis on what was said in the course of this directions hearing; in particular, on what they maintain was a concession, during that directions hearing, made by Senior Counsel for the Applicants that the Medicina (or NexGen) business was still running (T 3.21-22); in the context of the agreement by the Applicants to the defendants' solicitors taking custody of the various devices and keeping them in their offices while having first access for the purposes of the privilege review (T 5.29-37). The Applicants point to the following exchange in relation to the Dynamics Account password (from T 6.37-41): HIS HONOUR: But is there a problem with giving them the new password if they need it? DAWSON: No, your Honour. And we've proposed that in the orders …
The Respondents emphasise that Senior Counsel for the Applicants told Kunc J that "[t]he problem with this [i.e., the extension of time sought for the privilege review] is that this business is still running" and that "we say they're still using our information and our formulas and other things". The Respondents say that, by this, it was being suggested by the Applicants that because the Respondents were still using the Applicants' information there was a need to have the matter progressed expeditiously (see 17/7/20 at T 63.10); and hence that there was no suggestion that on that occasion that what was achieved on 21 February 2019 was a shutdown of the business. The significance attached to this was that, notwithstanding this, no injunction was sought to restrain the conduct of the business.
The Applicants say that a review of the entirety of the transcript shows that this did not amount to an acknowledgment or concession that they knew that people were accessing the Dynamics Account. It is said that the concern expressed on the Applicants' behalf at the hearing on 14 March 2019 before Kunc J, that the ongoing operation of Medicina's business involved the use of the Applicants' information and formulas, cannot be converted into an admission that the Applicants knew that the defendants were continuing to access the Dynamics Platform. It is noted that no such "concession" is recorded; and, in any event, it is said that it could not have been made at that point (i.e., before the Applicants had had access to the platform themselves). It is noted that the 14 March 2019 Orders were made to facilitate the Respondents' privilege review of the Dynamics Platform and to defer the Applicants' access to the Dynamics Platform to gather evidence. The Applicants say that it is not clear how the Respondents can suggest that the submission was a concession in light of the concerns expressed on behalf of the Applicants at the hearing before Kunc J on 21 February 2019, namely that if the defendants were given access to the Dynamics Platform, they would continue to use any information on the platform in breach of the settlement of the 2017 Proceedings (see 21/2/19 at T 3.44-45; T 5.9-10).

[27]

Privilege review after 14 March 2019

From 14 March 2019 to 21 March 2019, Miller & Prince undertook further work reviewing the devices and the Dynamics Account to identify privileged documents. The First Respondent took carriage of the privilege review, and the Second Respondent had limited involvement in that review (see Mr Athanassios' affidavit sworn 10 January 2020 at [86]-[95]; and Mr Gerges' affidavit sworn 10 January 2020 at [46]-[52]). The First Respondent has deposed that each day in the period from 15 March 2019 to 21 March 2019, Mr Corry attended the offices of Miller & Prince with his own solicitor to review the electronic documents on the devices and on the Dynamics Account; and that the First Respondent was not involved in that review (see Mr Gerges' affidavit sworn 10 January 2020 at [50]).

[28]

Collection of devices by Respondents from Independent Solicitor

At 11:22am on 14 March 2019, Ms Tereana Suhle, an Associate at Miller & Prince, sent an email to the Independent Solicitor, asking when someone from Miller & Prince would be able to collect the relevant devices from the office of the Independent Solicitor, and advising that Miller & Prince would forward a sealed copy of the 14 March 2019 Orders when they were available online. That email was copied to both of the Respondents, and to the solicitors for the Applicants and for Mr Corry.
At 11:37am on 14 March 2019, the Independent Solicitor responded to Ms Suhle, indicating that he would comply with the 14 March 2019 Orders when he knew what orders had been made. That email was also copied to both of the Respondents, and the solicitors for the Applicants and for Mr Corry.
At 1:00pm on 14 March 2019, Mr Wallman sent an email to the Independent Solicitor setting out the 14 March 2019 Orders, including the Undertaking. Mr Wallman's email, and the preceding email chain, was copied to both of the Respondents, and the solicitor for Mr Corry.

[29]

The 15 March 2019 email

On 15 March 2019, at 10:36am, Ms Suhle sent an email to the Independent Computer Expert referring to the 14 March 2019 Orders and requesting that she be provided with the password or any variation to the password in respect of the Dynamics Account as a matter of urgency. Ms Suhle's email, and the preceding email chain, was copied to the Respondents (see Mr Gerges' affidavit sworn 10 January 2020 at [53]; and Mr Athanassios' affidavit sworn 10 January 2020 at [96]).
At 12:03pm on 15 March 2019 (in what turned out to be the fateful email, in that this was what was later forwarded to the defendants in admitted, but inadvertent, breach of the Undertaking, to which I will refer as the Password Email), the Independent Computer Expert sent an email to Ms Suhle (copied to each of the Respondents and to the solicitor for Mr Corry) providing the "password for Microsoft Dynamics" (the Password) and advising that the username was the alex@nexgenpharma email address.
Pausing here, I note that, in general, the email communications between the relevant persons appear to be made by way of a response to preceding emails rather than as separate communications and that they therefore often formed part of an email chain.
At 4:05pm on 15 March 2019, the First Respondent sent an email to the Independent Computer Expert, which included the preceding email chain, requesting that the Independent Computer Expert confirm the passwords for various electronic devices.
At 4:07pm, on 15 March 2019, Mr Corry (not as part of the above email chain) sent an email to his solicitor and to each of the Respondents about the issue of privilege (see Mr Athanassios' affidavit of 10 January 2020 at [180]).
At 4:58pm on 15 March 2019, the Independent Computer Expert sent an email to the First Respondent, which included the preceding email chain (but not the above 4:07pm email from Mr Corry which was not part of that email chain), copied to each of Ms Suhle, the Second Respondent, and Mr Corry's solicitor, advising that the Independent Computer Expert had not required passwords to access the devices but attaching a document recording passwords to the devices that Mr Corry had previously provided.
At 5:06pm on 15 March 2019, the First Respondent sent an email (the Breach Email) to all of the defendants (i.e., to all of the directors of Medicina, including Mr Corry at the legal_ac@nexgenpharma email address), copied to the Second Respondent, asking the defendants if they could clarify which of the passwords to the devices provided by the Independent Computer Expert belonged to which of the particular devices. The email included the preceding email chain, including (relevantly, and most unfortunately to say the least) the Password Email. The email stated: Dear All, Please see email below and attachment. None of the passwords attached seem to work. If either of you can clarify which password belongs to which device (and soon) that would be much appreciated as we are short on time as it is for what will no doubt be an extensive exercise. I look forward to your prompt reply.

[30]

21 March 2019 directions hearing

On 21 March 2019, there was another directions hearing before Kunc J. By that stage, the privilege review had been completed, and what was apparently envisaged was that the Applicants were to be permitted to have access to those documents over which there was no claim for privilege.
His Honour made orders providing for the provision by the solicitors for Medicina to the solicitors for the Applicants by 5:00pm that day of "the password to the Microsoft 365 Dynamics Account and all passwords to the Accessible and Inaccessible Devices" (as there defined) (see order 2). Pursuant to order 3, the solicitors for the Applicants undertook to the Court not to change or otherwise allow the password to be varied "in respect of the Microsoft 365 Dynamics Account" and not to provide the password to the Microsoft 365 Dynamics Account to the Applicants, their officers, representatives or employees unless and until further order of the Court. Pausing here, this again suggests that there was an understanding at that time that there was only one password to the Dynamics Account.
At 5:09pm on 21 March 2019, the Second Respondent provided to Mr Wallman the passwords for the devices and the password to the Dynamics Platform, following which the Applicants commenced their evidence review.

[31]

Applicants' review of documents on Dynamics Account

Between 22 March 2019 and 23 April 2019, the solicitors for the Applicants reviewed documents on the Dynamics Account (see Points of Claim at [28]-[30]; Mr Wallman's affidavit affirmed 12 August 2020 at [42]-[57]; and the Wallman Costs Affidavit at [12]-[13]). Mr Wallman has deposed that the purpose of the review was to identify various documents, including documents recording formulas of medication, necessary to prove the Applicants' case against the defendants (see Mr Wallman's affidavit affirmed 7 May 2019 at [20]). As part of that review, two computer analysts, Mr Nick Bova and Ms Asha Vasu, accessed the Dynamics Platform for the purpose of comparing the levels of similarity between formulas on the platform and the Applicants' formulas (see Mr Wallman's affidavit affirmed 7 May 2019 at [21]).
Relevantly, Mr Wallman has deposed that he accessed and reviewed approximately 100 documents, but that he did not record the majority of the documents he reviewed as he was not anticipating that access to the Dynamics Platform would be disrupted. He did record twelve documents he accessed and reviewed on 22 March 2019 (see Mr Wallman's affidavit affirmed 7 May 2019 at [25]-[26]; and Ex A). Mr Wallman's evidence is that he experienced no problem accessing the Dynamics Platform of any documents on the platform during his review. He says that he was told by Mr Bova and Ms Vasu that they were able to access documents containing formulas through the SharePoint screen on the Dynamics Platform (Mr Wallman's affidavit affirmed 7 May 2019 at [22]; T 30.21-30.34).

[32]

Mr Corry's claim for confidentiality

On 26 March 2019, Mr Corry swore an affidavit in support of his claim for confidentiality in respect of the Dynamics Account and the information held in that account (that affidavit forming part of Ex 1). The Respondents note that that affidavit explained the operation and functionality of the Dynamics Account in detail; and that it also annexed a number of pages detailing 46 different applications or files and including hyperlinks to access each file and separate links to identify where each application or file was located. It is submitted by the Respondents that the affidavit plainly could not have been prepared without Mr Corry having access to the Dynamics Account (the Applicants cavil with this). It is noted that the affidavit was served on the Applicants and Mr Wallman read it. (Pausing here, Mr Corry's account of the operation and functionality of the Dynamics Account could presumably have been prepared without actual access at the time to the Dynamics Account if it was based on his recollection but, as I understand it, it is the inclusion of hyperlinks and the like is said to show that Mr Corry had access to the Dynamics Account at that time. Nevertheless, it is not clear to me that this would necessarily have been apparent to the Applicants' solicitors.)
The Respondents say that the affidavit sworn 26 March 2019 of Mr Corry is a further example of information being provided to the Applicants which made no secret of the fact that Mr Corry continued to have access to the Dynamics Account. It is said that the Applicants raised no issue about that at the time. The Respondents say that it would have made no sense for Mr Corry to be raising the issue of confidential information contained on the Dynamics Account if the effect of the court orders was to prevent him and the other defendants from using or accessing the Dynamics Account. It is said that on that construction of the relevant orders, the documents and information contained on the Dynamics Account would have ceased to be of any interest to Mr Corry and the other defendants.

[33]

27 March 2019 directions hearing

On 27 March 2019, there was another directions hearing before Kunc J. On that occasion Counsel appeared for Mr Corry and the Second Respondent appeared for Medicina. Orders were made which permitted the Applicants to inspect the Confidential Documents (as defined) upon terms that any officer of the Applicants who wished to inspect those documents was required first to sign and serve on the solicitors for the defendants the Confidentiality Undertaking as defined in the 21 March 2019 Orders (see Mr Wallman's affidavit affirmed 12 August 2019 at [43]).

[34]

Review of documents on Dynamics Account

On and from 27 March 2019, Mr Bova and Ms Vasu, reviewed documents on the Dynamics Account through the First Corry Email Account (see Points of Claim at [30]).

[35]

Notification Alerts to Mr Corry of access to the Dynamics Account via First Corry Email Account

As adverted to above, in the period from 3 April 2019 to 3 June 2019, at least 102 Notification Alerts were sent to the Second Corry Email Account detailing documents reviewed by the Applicants on the Dynamics Account (see Points of Claim at [34]; Mr Wallman's affidavit affirmed 12 August 2019 at [50]-[55]).
At 8:43pm on 11 April 2019, Mr Corry sent an email (from his alexcorry@nexgenpharma email address; i.e., the Second Corry Email Account) to his solicitor and to the Second Respondent, which stated: Hi Dan and Chris. Fyi, Please see below. My understanding was that the orders provided access to dynamics. The file accessed below is a file listed on SharePoint which is a document server. I would attest a search beyond scope of the pipulse [sic; scil purpose] and the terms of the current orders I'll send through more as they come Cheers AC
The document that appeared (and to which reference was there made) was described as "Notification for the alert 'Bova Compounding Alert Policy'", and recorded that the user (alex@nexgenpharma) (i.e., the First Corry Email Account to which the Applicants at that stage had what they clearly understood to be the only access) had accessed a specified file.
The Second Respondent deposes that, when he received that email, he had a discussion with the First Respondent to the following effect: A: "George, an email came through from Alex with some sort of notification alert - what's he on about?" G: "Not important." A: "I don't understand what this is." G: "Don't worry about it." (see Mr Athanassios' affidavit sworn 10 January 2020 at [115]; and Mr Gerges' affidavit sworn 10 January 2020 at [68]-[71]). In their submissions, the Applicants point to matters that they say cast significant doubt on whether any such conversation occurred, which I address in due course.
From 12 April 2019 to 24 April 2019, further emails were sent by Mr Corry (at the alexcorry@nexgenpharma address) to his solicitor and the Second Respondent, forwarding similar Notification Alerts showing access to files (see Mr Athanassios' affidavit sworn 10 January 2020 at [116]-[117]; and Mr Gerges' affidavit sworn 10 January 2020 at [72]-[73]).
The Respondents admit that they received a "small number" of emails from Mr Corry indicating that there had been activity on Medicina's Dynamics Platform but they maintain that the content of those emails did not inform the Respondents that Mr Corry had established a new means of access to the Dynamics Account (and in any event, as already noted, they say that access to the Dynamics Platform or Dynamics Account by Mr Corry was not prohibited by the orders).

[36]

11 April 2019 directions hearing

On 11 April 2019 there was another directions hearing before Kunc J. On that occasion, orders were made joining the other directors of Medicina (Mr Singh, Mr Goradia and Mr Ghaly) as the third to fifth defendants, respectively, to the 2019 Proceeding. From that time, the Second Respondent (and Miller & Prince) acted for those defendants as well as Medicina in the 2019 Proceeding.

[37]

Alleged difficulties with Applicants' access to Dynamics Account

The Applicants allege (see Points of Claim at [39]) that on 23 April 2019: their access to documents containing formulas on the Dynamics Account was disabled; the format of the Dynamics Account was changed, so that it appeared that folders had been removed and documents containing formulas were no longer visible or accessible and had been deleted; and that they identified for the first time that the Second Corry Email Account had been created (with access to the Dynamics Account).
Mr Wallman's evidence is that on 23 April 2019 he was informed by Mr Bova that his and Ms Vasu's access to the Dynamics Platform had been disabled (Mr Wallman's affidavit affirmed 7 May 2019 at [23]; Ex A; 6/4/20 at T 31.34-44); and that he was informed by Mr Bova and Ms Vasu, that the format of the Dynamics Platform had changed, in that folders appeared to have been removed and documents containing formulas were no longer visible or accessible (see Mr Wallman's affidavit affirmed 7 May 2019 at [24]; Ex A; 6/4/20 at T 31.44-32.5).
After being informed of the above, Mr Wallman attempted to access documents on the platform between 1 and 7 May 2019. Mr Wallman's evidence is that he was unable to access the majority of the twelve documents that he had previously accessed; and that he was otherwise only able to access documents containing formulas that were identified as "recently accessed" documents (Mr Wallman's affidavit affirmed 7 May 2019 at [28]-[30]; Ex A). (The Applicants note that there was no challenge in cross-examination to the above evidence.)
Meanwhile, the Applicants say that, as a result of the disruption caused to the Applicants' review of the Dynamics Platform, they ceased to review the Dynamics Account on 23 April 2019 (Mr Wallman's affidavit affirmed 12 August 2019 at [64]).

[38]

23 April 2019 allegation by Applicants of misconduct

At 9:36pm on 23 April 2019, HWLE wrote to Miller & Prince (addressed to the Second Respondent) and to Mr Corry's solicitor, asserting, inter alia, that files to which they had previously had access on the Dynamics Account had been disabled; and that the defendants had attempted, unsuccessfully, to delete or destroy the records of a number of documents which "evidence the deliberate and calculated use and/or exploitation" of the Applicants' business records to carry on Medicina's business.
The letter demanded that: affidavits be provided from each of the defendants confirming that they had not deleted, or directed others to delete, documents; changed the Dynamics Account password; or limited the Applicants' access to the Dynamics Account; and that affidavits also be provided from every employee of the respective law firms concerned with the matter to confirm that they had not provided the password to the Dynamics Account to any of the defendants or their employees or agents.
Pausing here, one would think (particularly in light of the history of what had already occurred in the matter) that this would have caused no little concern on the part of the Respondents; and, not surprisingly, it appears from the Respondents' evidence in cross-examination (and to the promptness of their response in seeking instructions about this email - which occurred in the early hours of the morning on 24 April 2019) that it did.
The Second Respondent's evidence, for example, was that he read the Applicants' solicitors' letter of 23 April 2019 the same evening he received it ([131] of his affidavit sworn 10 January 2020). In cross-examination (on 6/5/20 at T 191.25-192.4), he said he may have been out of the office at 9:30pm but then, once home at about 11:00pm, he would have normally (and says he did in fact on that occasion) checked his emails, responded to emails, "and then addressed this" (referring to the letter of 23 April 2019). He agreed that upon reading the letter, which raised as a possibility the fact that the Respondents' firm had breached its undertaking to the Court, it "sent a cold chill through [his] blood." Further, he agreed that it was possible that he conducted some enquiries of his email at the time, shortly after receiving the letter, "to address the cold chill running through [his] blood about the possibility that [he] had breached an undertaking to the court". That accorded with his earlier evidence (on 6/5/20 at T 189.26-28) that when he received the letter he "wanted to get on top of it and find out what the issue was and why it had been - why the plaintiffs had been complaining about the access".

[39]

Directions hearing on 8 May 2019

There was a directions hearing before Kunc J on 8 May 2019 at which his Honour was informed by Senior Counsel for the Applicants that a second email account "with the status of global administrator" had been set up in Mr Corry's name after the search order was made; and that the Applicants did not know whether or not that email account had been used to access the "365 database".

[40]

Notice of motion filed 10 May 2019 and hearing 16 May 2019

A notice of motion was then filed by the Applicants on 10 May 2019 seeking orders including that the defendants file and serve affidavits regarding access to the Dynamics Account.
That notice of motion was heard by Kunc J on 16 May 2019. There was debate as to whether there was any existing order preventing Mr Corry from creating the Second Corry Email Account, and it was accepted that there was no order in express terms that had been breached, but it was said that what had occurred was a frustration of the regime that had been put in place (namely, one where the restriction of access to his password was designed to prevent Mr Corry having access to the Dynamics Account). By then, the Respondents were clearly on notice of the Applicants' assertions (and apparent understanding) as to the Password preventing Mr Corry having access to Dynamics Account, whatever be the case with the other users at Medicina.
Various orders were made at that time (see the orders of 16 May 2019) which included orders: for the defendants to file and serve affidavits in the terms described in [23] of the Search Order, including details of any listed thing altered or deleted from the Dynamics Account, and of how the Second Corry Email Account was created and the use made of it; and restraining the defendants from creating any further accounts or profiles within the Dynamics Account, the First Corry Email Account, or the Second Corry Email Account. The orders contained a notation (see below) that the order did not prevent the creation by the defendants of new documents within the Dynamics Account or from accessing and viewing the Dynamics Account.
The Respondents emphasise the following exchange that occurred between Kunc J and Senior Counsel for the Applicants on that occasion (16/5/20 at T 22.47-23.50): DAWSON: … the failure to tell us about the second Corry account, which it seems to us is the way in which Mr Corry has gone into the Dynamics Platform when all of the orders made to date … have been made build on the original search order and are designed to shut Mr Corry out… HIS HONOUR: Just pause there, please, Mr Dawson. Show me which order you say is breached by the creation of the second email account. DAWSON: Well, there isn't an order that says "he may not create a second account". I don't suggest that. What we say is - and I can take your Honour through the orders - every order built on restrictions against Mr Corry accessing the Microsoft Dynamics database. HIS HONOUR: Well, where is the order that says he can't access it? You may say, all right, there's no order that says he can't create a second account. But what has he breached by creating that account and, if you're right, accessing the database? DAWSON: Your Honour's right to put it in those terms because there isn't an order that says, "He may not access the database." What it says is he can't have the password to his account. That was, as I presented it, every time designed to prevent him having access. Now, if the order is wanting in the sense that there isn't an order in express terms saying, "And just for clarity, Mr Corry is not allowed to get behind this and access the Dynamics Platform in some other way" if that's the question then there is no order that says that. But plainly, given the terms of the search order which says "you can't delete things, you can't modify things, you can't move things around", and the orders that were made as we learnt of each attempt to frustrate the carrying out of that search order, if the proposition is that Mr Corry skates between the fence posts and gets through because there's no specific order saying he can't have any access, in circumstances where we were here a number of times, that would be a surprising conclusion, particularly in circumstances where the creation of the second account was not disclosed to your Honour... HIS HONOUR: The fact remains, Mr Dawson, that you can't point me to an order which has been breached either by the creation of the second email account or indeed the use of the second email account to access the platform. DAWSON: There's no order in express terms that he's breached, no, but the point is frustration, not breach of the order; frustration of the regime that's been put in [place]. HIS HONOUR: That's a different question. DAWSON: Yes, and that's what I'm putting. But your Honour's question, is there an express order that I say he's breached? No. …"

[41]

Events after 16 May 2019 hearing

At 6:28pm on 16 May 2019, the Second Respondent wrote to all staff at Medicina to notify them of the orders and requiring each employee to sign a document confirming he or she had read the letter.
Affidavits (the May Affidavits) were in due course attested to by Mr Singh (on 24 May 2019), Mr Goradia (on 24 May 2019), and Mr Ghaly (on 27 May 2019), respectively. Each of Mr Singh and Mr Goradia deposed that he had not accessed the Dynamics Account since 18 February 2019 nor asked anyone to access it; had not viewed altered or deleted any information in the Dynamics Account; had not had access to the Second Corry Email Account; nor did he know whether that email account was used to access the Dynamics Account; or to delete, remove or change documents or to restrict the Applicants' access. Those affidavits were prepared with the assistance of the First Respondent.
Mr Ghaly's affidavit (also prepared with the assistance of the First Respondent) differed from the other two in that he swore that he did have access to the Dynamics Account but that he had not accessed it using the alex@nexgenpharma account (i.e., the First Corry Email Account), and that that account (i.e., the first Corry Email Account) was never in his possession. He deposed that he had not asked anyone to access the Dynamics Account or given anyone access to the Dynamics Account using his email or Mr Corry's email. He said that he had not had access to the Second Corry Email Account, nor did he know whether that email account was used to access the Dynamics Account, or to delete, remove or change documents or to restrict the Applicants' access to the Dynamics Account.
Mr Ghaly there deposed that he continued to use his account to process and dispense customers' prescriptions and orders; and to review and send emails and create new products, which included correcting any incorrect entries from time to time. He recalled deleting approximately 3 products (because there were replicated entries in the system) but otherwise did not recall deleting any files.
Mr Ghaly has sworn a further affidavit on 28 May 2019 in which he there set out details of enquiries made by him of thirteen employees of Medicina; including in relation to all of those employees their own ability to access the Dynamics Account via personal email accounts, their knowledge (or otherwise) of the Second Corry Email Account; and that they did not access the Dynamics Account using either the First Corry Email Account or the Second Corry Email Account.

[42]

Restoration of access and files

On 3 June 2019, a computer expert retained by the Respondents (Mr Ulysses Maclaren of SSW) provided a report concluding that: compromised access to the Dynamics Account had been caused by client customisations to the account most likely some time in the past which had been "broken" by a software update from Microsoft; there had been compromised access to the library but that had been completely restored; going as far back as 27 February 2019 (which was the earliest date of the audit logs), there had been no files deleted from the standard operating procedures library; several other files had been deleted by various users between 27 February and 28 May 2019 and the report provided a log of those files; files that were in the recycle bin had been restored; and, based on Mr Maclaren's investigations on the available dataset, no data had been lost.

[43]

Settlement of 2019 Proceeding as between Applicants and other defendants

A mediation was conducted between the Applicants and the second to fifth defendants in respect of the 2019 Proceeding on 4-5 June 2019, which resulted in a settlement under which settlement amounts totalling $1 million were to be paid in return for releases; and the parties thereto each agreed to bear its or his own costs. As part of the settlement, the Applicants obtained access to the Second Corry Email Account on 3 July 2019. (The Respondents suggest that the present claim for "wasted costs" does not take into account the settlement reached but the Applicants point out that each party agreed to bear its own costs under the terms of that settlement and that, at that time they were not aware of the impugned conduct.)

[44]

Discovery of emails in Second Corry Email Account

On 18 July 2019, HWLE wrote to Miller & Prince alleging that, after reviewing the Second Corry Email Account, there were emails in that account that suggested that Miller & Prince: had breached undertakings given to the Court; knew of and encouraged Mr Corry to circumvent court orders; and failed to inform HWLE or the court of that conduct. HWLE alleged that that conduct resulted in the Applicants being unable to prove or being significantly hindered in proving their case in the proceedings and incurring unnecessary and significant costs.
The Respondents have deposed that they first became aware on 18 July 2019 that the Password to the Dynamics Account had been sent to Mr Corry (see Mr Athanassios' affidavit sworn 10 January 2020 at [17],[173]; and Mr Gerges' affidavit sworn 10 January 2020 at [63], [112]).
On 26 July 2019 (following a directions hearing on 22 July 2019 before Kunc J (in which contempt proceedings against Mr Corry were foreshadowed, as was a s 99 of the Civil Procedure Act application against Miller & Prince), his Honour indicated that he expected Miller & Prince to respond in writing to HWLE; Miller & Prince subsequently wrote to HWLE on 26 July 2019 stating that the Password to the First Corry Email Account was inadvertently disclosed to Mr Corry. A further letter was sent on 1 August 2019 in relation thereto.

[45]

Orders in relation to the Dynamics Account

It is relevant at this point to consider the proper construction of the orders that were made in relation to the Dynamics Account because the Respondents maintain that a critically important issue in the case concerns the extent to which the 21 February 2019 and 14 March 2019 Orders restricted or prevented access to the Dynamics Account or the use of the Dynamics Account (an associated issue being identified as the extent to which those Orders required the Respondents and/or Mr Corry to provide passwords to the Applicants or the Independent Computer Expert). I will then consider the issue as to the Respondents' understanding at the time of those Orders (after first addressing the credit issues raised in relation to the Respondents).
At the outset I note that it has been said that the approach to construction of court orders is that which applies generally to the construction of contracts (see JKB Holdings Pty Limited v de la Vega [2013] NSWSC 501 at [87], per Lindsay J).
The Respondents have submitted that, in circumstances where the construction contended for by the Applicants is relied on as a central component of their s 99 of the Civil Procedure Act case against the Respondents, that construction should only be accepted if the Court is satisfied that is the correct construction on the Briginshaw standard. I have some difficulty with that proposition. Insofar as the relevant issue is the proper construction of orders made by the Court, that must be an exercise in reviewing and forming a concluded view as to the orders - not something influenced by the significance of the use to be made of those orders (cf perhaps the position where the issue is as to what a party's subjective understanding of the orders was). In any event, nothing turns on this because I am comfortably of the view set out in due course as to the proper construction of the orders having regard to the potential consequences of such a finding.
As adverted to already, the Applicants maintain that the construction contended for by the Respondents of the respective Orders is a recent invention only raised for the first time in submissions filed on 3 April 2019 before the first tranche of the hearing (and that this was in part responsible for the elongation of the hearing). The Applicants place significance in a change of terminology as between the Respondents' opening and closing submissions (namely that references in the former to the 21 February 2019 Orders and 14 March 2019 Orders relating only to "Mr Corry's email account" have been replaced with references to "Mr Corry's specific login" to the Dynamics Account) as a "further demonstration of the artificiality" of what they characterise as the Respondents' recent construction argument.

[46]

Proper construction of the relevant Orders

The opposing constructions have been outlined already. The Applicants contend that the Orders gave the Independent Solicitor and the Independent Computer Expert control over everything the subject of the Search Order (the devices, software and cloud storage); and prevented the defendants from having access to any of that material without further order of the Court, thus effectively locking Mr Corry and the other defendants out of the Dynamics Platform. The Respondents say that the Orders made by Kunc J: were directed to Mr Corry's login to the Dynamics Account via the First Corry Email Account; did not require the Respondents or any of the defendants to the proceedings to disclose to the Applicants, the Independent Solicitor, or the Independent Computer Expert any other user login details or associated password connected with the Dynamics Account; did not restrain or prevent the continued operation of the Medicina business; and did not restrain or prevent any employees or directors of Medicina from accessing or using the Dynamics Account. The Respondents say that the relevant Orders only ever restricted access to the Dynamics Platform using Mr Corry's unique login and password.

[47]

Applicants' submissions as to construction of orders

The Applicants say that the access regime effected by the 21 February 2019 Orders, the 14 March 2019 Orders and the 21 March 2019 Orders, and the conduct of the parties and their representatives in that period, was predicated on there being only one password to the Dynamics Platform.
The Applicants note that the Search Order refers to the Dynamics Platform in Schedule A (namely, "Medicina Pty Ltd's Microsoft Dynamics 365 software"). They say that this is obviously what the Independent Computer Expert was referring to in her report when referring to the "Dynamics Account", emphasising that the report makes clear that the Independent Computer Expert understood her task was to "take control" of two separate things: "the business Microsoft Office 365 account" (emails) and "the Microsoft Dynamics Account" for the purpose of imaging them so that they could be searched for the Applicants' information.
It is said that this is clear from the various references to emails on the one hand and to the Dynamics Platform on the other (on pp 5-7 of the report). It is also noted that the Evidence List and the Hard Drive Listing in Annexure E separately list the email accounts of the various employees of the second defendant, and the Dynamics Platform. The Applicants maintain that the reference to Dynamics on page 10 of the report in the Evidence List is plainly a reference to the platform ("Microsoft Office Dynamics"), referring to the description in the report of the login addresses as "Microsoft Office 365 Emails", as well as to the explanation on page 7 of the Report that the evidence captured and placed on a hard drive includes the emails of the various named persons (as well as the contents of the devices). It is said that there is no suggestion in the Report that those email addresses are also logins for the Dynamics Platform, let alone logins with their own password. I note here that the Evidence List includes no login for the Dynamics Platform itself.
The Applicants submit that the reference to "the Microsoft 365 Dynamics Account referred to on page 7 of the [Independent Computer Expert]'s report" in the 21 February 2019 Orders is a reference to the Dynamics Platform, and not merely to Mr Corry's access to it (and they say that that was how the Applicants, Mr Wallman and the Respondents understood it).

[48]

Respondents' submissions as to construction of orders

The Respondents say that the only regime with which the 21 February 2019 and 14 March 2019 orders were concerned was that the downloading of the Dynamics Account could take place via the First Corry Email Account; and that "means of accessing" the Dynamics Account and the Microsoft 365 emails was preserved (see 17/7/20 at T 66.15). In other words, they focus on the preservation of a means of access (not to the preservation of the material being downloaded via that means of access). With respect, I consider it difficult to accept that this is what the Applicants understood at the relevant time; but, in any event, once complaint was made in April 2019 about deletions from the Dynamics Account it must have been obvious to the Respondents that the Applicants thought that more was being preserved than just a "means of access".
The Respondents, however, maintain that there is no evidence to suggest that anything was said by anyone on 21 February 2019 to the effect that the purpose of the orders was to prevent all employees of Medicina from using the Dynamics Account, or to prevent Medicina from using the Dynamics Account in the operation of its business; and that a Ferrcom inference can be drawn from the fact that no evidence was called by the other legal representatives present on that occasion to contradict the Second Respondent's evidence of the discussions outside of Court (citing Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 (Ferrcom) at 418-419, per Handley JA).
Indeed, the Respondents' position on the present application is to criticise the drafting of the orders 6. They say that order 6 should have been drafted by the Applicants' legal representatives with greater precision and clarity. In particular, they say that the requirement for the provision of passwords by reference to page 7 of the Independent Computer Expert's report (without identifying any part of that page or otherwise specifying what was to be provided) was "clumsy" and "unhelpful"; and that it is plain from a reading of the first half of that page of the report that it is concerned only with the login and password that had been provided by Mr Corry to the Independent Computer Expert on 19 February 2019 (the First Corry Email Account), as detailed on p 5 of the Independent Computer Expert's report (where the Independent Computer Expert noted that Mr Corry had provided passwords to each of the two online accounts there specified with the same login name).

[49]

Conclusion as to proper construction of 21 February 2019 Orders and 14 March 2019 Orders

I have extracted the relevant orders above. What was required under the 21 February 2019 Orders in terms of the provision of passwords was the provision of "all passwords to the Microsoft 365 Dynamics Account referred to on page 7 of the Independent Computer Expert's report" (my emphasis).
Page 7 of that report (as noted above) made reference to the request Mr Corry had made for access to his "Microsoft Office 365 business account" (which had been refused until the Independent Computer Expert finished downloading "both online accounts") and to the disruption to Mr Banerji's downloading of the "Microsoft Office Dynamics Account" (i.e., there was a distinction there drawn between the "Microsoft Office 365 business account", which by reference to the evidence list referred to above must have been to Mr Corry's email account, to which the Independent Computer Expert understood Mr Corry had requested access; and the "Microsoft 365 Dynamics Account" or "Microsoft Office Dynamics Account", the downloading of which had been disrupted).
It is in my opinion significant that what was there being required by the terms of order 6 was the provision of "all passwords" (as I have emphasised) to the "Microsoft 365 Dynamics Account". To a reasonable reader who understood (as the Respondents must, on their present case, have done) that there was a difference between the "live" Dynamics Platform and an individual's email account, the reference to the Microsoft 365 Dynamics Account must have been understood as a reference to the "Dynamics Account" (i.e. to the live platform). Therefore, the order for provision of "all" passwords must have encompassed, at the very least, all passwords the use of which would enable a user to have access to the Dynamics Platform. In its terms, therefore, I read "all" passwords there to mean every single password of however many employees had access to the Dynamics Account.
There might perhaps have been a distinction drawn between passwords that gave limited rights of access (such as viewing, but not editing, documents on the platform); but that would involve reading words into the orders that are not there. In other words, I accept that there might be an argument that it was not necessary, in order to preserve the integrity of the documents on the platform, for a password that gave "viewing only" access to be obtained but that is not the point since no such limitation was built into the orders. In any event, that is a moot point because even if such a limitation were able to be read into the orders, at the very least, the orders would encompass all passwords with user access that permitted the documents on the platform to be amended or deleted. The reference to "all" passwords thus seems to me to make clear that the parties contemplated (whether correctly or otherwise) that there might be more than one password that gave access to the Dynamics Account; and I see no basis to read down the orders to restrict this to "all passwords" that gave Mr Corry access to the Dynamics Account.

[50]

Credibility

The Applicants maintain that the Respondents' evidence was attended by considerable doubt and, in some instances, was demonstrably false. It is said that each Respondent demonstrated an unwillingness to answer questions in a frank manner; and that there were several occasions on which they were forced in cross-examination to contradict an earlier answer they had given. The Applicants say that the Respondents' evidence in cross-examination as to their claimed understanding of the Independent Computer Expert Report was unconvincing.
In particular, the Applicants point to the following in respect of each of the Respondents.
It is noted that the First Respondent, when asked about his state of mind as at 15 March 2019 as to the reason equipment had been moved from Medicina's business premises on the day the Search Order was executed, initially maintained that no reason occurred to him at the time (T 32.37-33.1) but then admitted that he knew at the time that it was to avoid the search party finding those items (T 33.36-44); but said that he had never turned his mind at the time to Mr Corry's reason for attempting to frustrate the Search Order (T 43.11-13). The Applicants say that the First Respondent was more focused on his evidence that he was not going to judge Mr Corry's future conduct by reference to past conduct (T 42.29-30; 43.6-9), but when pressed he did admit that, at the time, he thought that Mr Corry's actions were to prevent the Applicants from proving their case (T 43.15-46) (but see T 43.48-45.1).
The Applicants next say that the First Respondent obfuscated in his evidence in relation to the 24 April 2019 notification email and that he gave answers which were "self-evidently contradicted" by the document itself (see at T 120.46-127.34); for example, maintaining that the "notification" referred to was in relation to the IP address search and not the alert that Mr Corry had set up in the Dynamics Platform.
As to the evidence in relation to the discussion between the Respondents in relation to the 23 April 2019 letter, the Applicants point to inconsistency between the First Respondent's 10 January 2020 affidavit at [83] (in which the First Respondent said that the Second Respondent had "explained the 23 April Letter" to him); and his oral evidence in which he denied that the Second Respondent had explained the letter to him, saying that he had said to the Second Respondent that he would read the letter first and come back to him (see T 133.26-7). Reference is also made to the evidence at T 133.33-38; T 133.40-134.11 in that regard.

[51]

Respondents' submissions as to their credit

The Respondents maintain that they have taken the allegations made against them very seriously; they emphasise that they are both at an early stage of their careers, and they point to the stress of the hearing as matters to be taken into account when considering their evidence. As adverted to above, they submit that the stress of skilful cross-examination in the present case was exacerbated by the fact that it proceeded "at great length over multiple days with hearings that often ran for significantly longer than usual court hours and with reduced breaks", and that it took place "in a confined room, sitting in close proximity to the cross-examiner during a pandemic and with the challenges of video links to the Court". The Applicants challenge the premise on which this last submission is made.
In that regard, while I accept that the fact that the matter was heard during the height of the restrictions due to the current COVID-19 pandemic meant that there was some disruption occasioned by technological issues, I do not accept that there was any procedural unfairness or undue stress thereby occasioned to the Respondents. In particular, insofar as it was submitted that the cross-examination of the Respondents was more stressful because it was conducted in a confined conference room and beyond normal Court sitting hours, I repeat my observation made in the course of submissions that the Respondents did not seem to me to be subjected to any more stressful cross-examination than would have been the case had they been sitting in the witness box in the court room (and indeed I would have thought it at least arguable and probably more likely that the latter would have occasioned a greater level of stress due to the formality of the court room). (Pausing here, to my observation the conduct of hearings in the virtual court room environment has had a regrettable tendency to lead to informality amongst practitioners and witnesses alike but I digress).
That said, whether in the course of a virtual hearing taking place during a pandemic, or not, I accept that the present application raises issues that any responsible legal practitioner would surely find highly stressful.
The Respondents submit that they were credible witnesses who gave truthful evidence which was supported by contemporaneous events and documents. It is conceded that the Second Respondent was argumentative at times, but it is said that this was when he sought to justify his conduct and was in the face of "sustained and often repetitive questioning" (for example, as to whether the 21 February 2019 Orders were directed to Medicina's Dynamics Account as a whole, or that account as accessed and viewed via Mr Corry's login via the First Corry Email Account). It is submitted that the Second Respondent's refusal to accept the Applicants' construction of the orders does not reflect poorly on his credit (and does not demonstrate that he was an untruthful witness or that he was lying).

[52]

Applicants' solicitor

It is relevant here to note that criticism was not made as to Mr Wallman's credit, as such; although complaint was made that Mr Wallman had not made enquiries that were open to be made by him as to the operation of the Dynamics Account; and (as already noted) criticism was made of the drafting of the relevant orders (responsibility for which appears to be attributed to him). I note here that, as to the submission by the Respondents that Mr Wallman did not make enquiries about other possible access to the Dynamics Platform, the Applicants point to Mr Wallman's evidence in cross-examination that he did not believe those enquiries were necessary (because nothing in the Independent Computer Expert's Report suggested other logins to the Dynamics Platform and Mr Corry was expressing extreme frustration at not having access); and his awareness that Mr Corry was using a different email account told him nothing about his access to the Dynamics Platform (see at [24]).

[53]

Conclusions as to evidence

I consider that the Respondents' evidence should be seen in the context of the (no doubt understandable) human reaction of seeking to portray one's actions in the best possible light. I do not accept that the Respondents have consciously lied to the Court or have deliberately concealed matters from the Court. I consider that, while at times in the witness box appearing defensive of their own conduct, the Respondents endeavoured to give truthful evidence and were conscious of the seriousness of, and apologetic as to, their breach of the Undertaking.

[54]

Respondents' understanding of the relevant orders

I turn now to the submissions made as to the Respondents' understanding of the relevant orders.

[55]

Applicants' submissions as to understanding of orders

The Applicants submit that the fact that the Respondents did not understand from the Independent Computer Expert's Report that there were multiple logins to the Dynamics Platform with their own unique passwords is clear from their conduct at the time (referring to the terms of email correspondence, and in particular, the 27 February 2019 email (Ex B) and to the issues raised in the cross-examination of the Respondents - to which I have referred above). Reference is also made to the Second Respondent's affidavit of 13 March 2019 in this regard.
The Applicants say that if the Respondents had really believed that there were multiple logins with passwords to the Dynamics Platform they would have referred to that when dealing with Mr Corry's repeated complaints about not having access to his emails and to the Dynamics Account (see the communications from 21-29 February 2019 to which I have referred above); and that if that was the case then the affidavit of the Second Respondent sworn 13 March 2019, and the basis put to the Court for the orders the Respondents were seeking in March 2019, was seriously misleading; and the regime proposed by the Respondents made little sense.
The Applicants also say that, if the Respondents believed that there were multiple logins, then it follows that the Second Respondent must have known that the provision of only one password on 21 February 2019 was incomplete and a breach of the 21 February 2019 Orders (and must have appreciated that he was misleading the Independent Solicitor when he provided the one password and passed on Mr Corry's concern about being denied access if the password were to be changed).
Much weight is placed on the 27 February 2019 email, in that it is said that if there were multiple access points to the Dynamics Platform then there would not have been a basis to ask for an undertaking as to damages in respect of disruption to business (as the Second Respondent suggested and/or recommended might be done); and there would not have been a basis for the assertions contained in the March 2019 affidavit as to the delay in the privilege review due to not having the password.
The Applicants say that the suggestion (in the evidence of both Respondents) that their understanding that there were multiple logins to the Dynamics Platform with multiple passwords derived from instructions to that effect is also problematic. It is said that, if the Respondents really had those instructions, whether before or after 21 February 2019 (noting that the First Respondent said in cross-examination that he had that knowledge before and after the 21 February 2019 Orders; at T 9.27-38), then they must have appreciated that the defendants were in breach of order 6 of the 21 February 2019 Orders, which required the defendants to provide "all" passwords to the Dynamics Platform. It is submitted that the Respondents accepted as much (see the First Respondent at T 79.13-16; the Second Respondent at T 56.15- 27).

[56]

Respondents' submissions as to understanding of the orders

The Second Respondent's evidence (T 22.8-36.30) was that, after reviewing the Independent Computer Expert's report, he understood that there were multiple users who could access the Dynamics Platform because the Independent Computer Expert had said that in her report (T 22.16); but he accepted that the emails were separate from the Dynamics Platform (T 30.15-19). Insofar as the Second Respondent had relied on the access IDs listed at page 8 of the report and his knowledge that Medicina had a number of employees (T 23.38-40; T 24.47), the Applicants say that the reference to "access IDs" is a reference to the heading "Access ID / Serial / Label" and the information set out at page 8 of the Independent Computer Expert's report (CB 357-359); and that there is nothing in the Independent Computer Expert's labelling or identification of the listed items of evidence that would indicate multiple users had access to the Dynamics Platform with unique passwords.
The First Respondent's evidence was also to the effect that he understood the Independent Computer Expert report as disclosing multiple logins (and the First Respondent referred to undisclosed instructions from the Respondents' client) (T 46.26-27; T 47.20-49.35).
As to the Respondents' subjective belief or understanding as at 21 February 2019 as to whether there were other users able to access the Dynamics Account, the Respondents say that their subjective belief is irrelevant on the question of construction (though it is accepted it is of relevance to the separate allegations of failure to disclose). Further, they point out that the Independent Computer Expert's report had only been provided to the Second Respondent at that hearing; and he had not had the opportunity properly to read it (noting that the First Respondent was not there and only read it after the orders were made).
The Respondents say that an available reading of the Independent Computer Expert's report was that there were multiple users of the Dynamics Account who used the identified logins to access both their emails and the Dynamics Account (and that it was entirely reasonable for the Respondents to have that understanding based on the report); and that it follows that it was reasonable for the Respondents to assume that the Applicants' legal representatives also understood that there were additional users of the Dynamics Account (so that this was not something the Respondents needed to tell them).

[57]

Conclusion as to respondents' understanding of the orders

I am not persuaded that the Respondents' understanding of the orders at the relevant time (to the extent that they gave it any considered thought - and I have real doubt that they did so) was that there were multiple logins and passwords to the Dynamics Account. Rather, I consider (on the balance of probabilities and conscious of the seriousness of the findings that I have been called upon to make in light of their potential consequences) that the Respondents proceeded (to the extent that they gave it any real thought) on the assumption that provision of Mr Corry's password would preserve the integrity of the Dynamics Account and that it was for that reason that Mr Corry was frustrated at the delay in his password being returned to him and the lack of access by reason thereof (i.e., that it would not be open for documents on the Dynamics Platform to be altered or deleted pending the downloading of the Dynamics Account by the Independent Computer Expert).
I do not consider that the communications and chronology of events set out above is consistent with the Respondents having an understanding at the relevant time that there were multiple users who had the ability to access the Dynamics Account and to amend or alter documents on that account. Indeed, had I accepted the Respondents' contentions in that regard, I would have been of the view that there was at the very least unsatisfactory professional conduct (and perhaps misconduct) in the Respondents not drawing that to the Applicants' attention once it must have become apparent to the Respondents that the Applicants were operating under the misunderstanding that "control" of the Dynamics Account had been achieved by the provision of the password to the First Corry Email Account.
I do not, however, consider that a finding that the Respondents have consciously lied in their evidence to the Court can here be made. I consider that the cross-examination of the Respondents made clear that they have engaged in a process of (not dishonest) reconstruction of the events that occurred in the heat of the litigation and in the face of acrimonious accusations from both Mr Corry and the Applicants. I consider it most likely that they have attempted to make sense of the disaster that had unfolded in relation to the breach of the Undertaking and the disruption to the regime for the inspection of the documents, and have fostered on an explanation that makes sense of their conduct in the most favourable light to them. It seems to me that their current stance is one of seeking in hindsight to excuse or justify their conduct (and to downplay the seriousness of it) by availing themselves of a construction of the orders that they have now convinced themselves must have been the case at the time.

[58]

Impugned conduct

I now propose to address seriatim the particular instances of conduct that the Applicants contend amount to serious misconduct, serious neglect or serious incompetence, as articulated in the Points of Claim; or otherwise resulted in costs improperly or without reasonable cause being incurred for which the Respondents are responsible.

[59]

(i) Breach of Undertaking

As already noted, it is common ground that the First Respondent's Breach Email was in breach of the Undertaking; that the Second Respondent's Further Breach Emails were also in breach of the Undertaking; and that the breaches were inadvertent.
The Respondents' evidence is that, if they had realised that they had inadvertently breached the Undertaking, they would have immediately brought this to the attention of the Applicants and the Court. Leaving aside the fact that this does not appear to be the course that was taken as soon as the discovery was made (which on the Respondents' evidence was 18 July 2019), acceptance by the Applicants that the breaches were inadvertent means that the question for determination here is as to whether the inadvertent disclosure of the Password amounts to serious neglect or serious incompetence within the meaning of s 99 of the Civil Procedure Act. (I consider in (ii) below the effect of the subsequent failure to disclose that inadvertent disclosure of the Password had occurred).

[60]

Applicants' submissions

The Applicants say that the breaches of the Undertaking that occurred on 15 March 2019 were the product of serious neglect or serious incompetence (indeed they say that the Breach Email and the Further Breach Emails occurred as a result of an extraordinary level of carelessness).
The Applicants emphasise that: the Respondents were communicating at the time not just with Mr Ghaly, Mr Goradia, and Mr Singh, but also with Mr Corry; and say that the Respondents knew: that Mr Corry and Mr Ghaly had attempted to frustrate the Search Order on the day it was executed (by removing and concealing items); that the Respondents knew that it was, in all likelihood, Mr Corry who had locked the Independent Computer Expert out of the Dynamics Account before she had been able to complete the imaging of the contents of the platform; and that Mr Corry was increasingly agitated about not having his password to the Dynamics Account (and being locked out of the platform).
It is submitted that it was incumbent on the Respondents in those circumstances to take very great care in their communications with the defendants concerning anything to do with the topic of passwords (particularly when passing anything from the Independent Computer Expert onto the defendants on that topic); and, hence, that their failure to take that care was, on their part, serious neglect and serious incompetence.
The Applicants note that, in cross-examination, the First Respondent accepted that the breach was serious (T 24.8), careless (T 107.2), and an oversight, but that he resisted the description "extraordinarily careless" (saying that that was a matter for the Court to decide; as was whether his oversight was incompetent) (T 26.34-27.28); and that the Second Respondent also accepted that the breach by the First Respondent was a serious matter (T 157.37), and accepted that his own inadvertent disclosure of the Password in the Further Breach Emails was an "extraordinary oversight" (T 161.13).
Pausing here, it is a matter for the Court to characterise the Respondents' conduct. The question whether the Respondents in hindsight accepted that their conduct was extraordinarily careless or the like (and their appreciation or otherwise of the seriousness of the breach of Undertaking) can, in my opinion, relevantly go only to considerations that might be taken into account when considering what sanction, if any, should be imposed if the jurisdiction to make a wasted costs order is found to be enlivened.

[61]

Respondents' submissions

At the outset, as already noted, the Respondents raise the pleading point that the only breach of the undertaking relied on by the Applicants in the Points of Claim arises from the email sent by the First Respondent at 5:06pm on 15 March 2019 (not the Further Breach Email), though it is accepted that the instance of the Further Breach forms part of the relevant circumstances in assessing the seriousness of the breach and whether it should result in a grant of relief pursuant to s 99 of the Civil Procedure Act.
The Applicants say their primary case is confined to the allegations concerning the Respondents' conduct set out in the Points of Claim; and that they do not seek to expand upon that case. To the extent that the Respondents complain that the Second Respondent's breach of the Undertaking is not particularised in the Points of Claim, the Applicants say that there can be no real complaint in light of the fact that the Second Respondent, despite including it in his affidavit evidence, did not appear to realise he had also breached the Undertaking until after the Applicants had pointed out the breach in their submissions (or, if he did, chose not to apologise for it when he apologised for the First Respondent's breach in his affidavits). Further, it is said that the Second Respondent was given a fair opportunity to respond to that issue during cross-examination.
As I do not ultimately consider that the breaches of Undertaking (though most unfortunate) were the product of serious incompetence or neglect, it is not necessary further to consider this pleading issue.
Turning then to the substantive issue now in dispute, the Respondents say that the relevant emails were sent by them at a time when they were both very busily occupied with a privilege review of a number of separate devices and the Dynamics Account, and working long hours with a weekend approaching and limited time in order to complete the review and ascertain the documents that should be the subject of a claim for privilege; that the breaches occurred in the context of each of them making a request of the defendants by separate emails on the evening of Friday 15 March 2019 to provide passwords to certain computer devices that needed to be reviewed on an urgent basis in compliance with paragraph 1 of the 14 March 2019 Orders; and that, in order to make these requests, each of them referred to, and sent to, the defendants the email and attachment received earlier in the day on 15 March 2019 from the Independent Computer Expert, which included the Password.

[62]

Finding as to (i)

I accept that the Respondents sincerely regret their mistake in forwarding the emails that contained the Password in the embedded email chain. In the circumstances in which that occurred, I consider that this amounted to incompetence (in the sense of a lack of care) on their part; but I am not persuaded that in all of the circumstances referred to above the breach(es) of the Undertaking amounted to serious neglect or serious incompetence, or otherwise enliven the exercise of the jurisdiction under s 99 of the Civil Procedure Act. It is an unfortunate fact of modern life (about which I consider that judicial notice can be taken) that emails can be sent in haste and without sufficient attention apparently being paid to the contents of an email chain of which they form part or to the recipients of the email. (The proliferation of "Reply All" emails is a common illustration of this.)
Relevantly, in this regard, I accept that the emails were sent at a time when the Respondents were under considerable pressure expeditiously to complete the privilege review and I accept their explanation of the circumstances in which they did not realise at the time they sent the Breach Emails that the Password was contained within the communications.

[63]

(ii) Failure to disclose provision of Password

As to the failure to disclose the provision of the Password, logically that focusses attention on the position when the Respondents first realised that the Password had been disclosed in breach of the Undertaking. The Applicants have made clear that they make no complaint about a failure to disclose the breach of Undertaking prior to the time at which the Respondents were aware of the fact that the Password had been provided to Mr Corry and the other defendants.

[64]

Applicants' submissions

The position of the Applicants focusses, first, on the search that was undertaken when complaint was first made on 23 April 2019 about provision of the Password to the defendants; and, second, on the repeated denial of this (the so-called False Assertion) on 29 April 2019.
As to the first, the Applicants contend that it is open on the evidence to conclude that the Respondents became aware that they had breached the Undertaking in April 2019 and decided to conceal that from the Applicants and the Court (which, it cannot be disputed would constitute serious misconduct). Even if the Respondents did not become aware that they had breached the Undertaking despite the investigation that was conducted in April 2019, then the Applicants say that their ignorance of that breach and their failure to disclose it was the product of serious neglect or serious incompetence - in other words, there is criticism as to the competence of the investigation into the allegation that was made that the Password had been provided to the defendants.
The Applicants maintain that, upon receipt by the Respondents of the Applicants' letter of 23 April 2019 (which raised concerns that the defendants were hindering the Applicants' access to documents on the Dynamics Account and which sought seeking confirmation that Miller & Prince had not provided the Password to any of the defendants) it was incumbent on the Respondents to conduct a competent investigation into the matters raised in that letter, including whether the Password had been provided by them to any of the defendants (Points of Claim at [42]). The Applicants say that a competent review would have included a review of the communications between the Respondents and the defendants; and would have identified the Respondents' breaches of the Undertaking and the circumstances of those breaches.
As to the investigation that was undertaken, the Applicants say that the extent of the investigation conducted by the First Respondent was to look at the sent items in his email account using the keywords "NHB" and "Medicina", and to read the subject line and part of the contents of those emails through a "reading pane" without scrolling through email chains; and without going to back review the emails that were sent immediately upon having received the Password from the Independent Computer Expert (see Mr Gerges' affidavit at [84]-[85]). As to the Second Respondent, it is said that the extent of the investigation was: to forward the letter from the solicitors for the Applicants to the defendants; to speak to Mr Corry; to speak to Ms Suhle and Ms Lam and request that they check their sent items; and to check his own sent items using the keyword "NHB", and without scrolling through email chains (see Mr Athanassios' affidavit at [131]-[139]).

[65]

Respondents' submissions

At the outset, as a general response to the various allegations by the Applicants as to serious misconduct or serious neglect/serious incompetence by the failure of the Respondents to make five different disclosures to the Applicants (namely, as to the breach of the Undertaking; that Mr Corry had accessed the Dynamics Account; the existence of the Second Corry Email Account; that Mr Corry was monitoring the Applicants' access and review of the Dynamics Account; and that documents had been deleted from the Dynamics Account), the Respondents say that they were never under any obligation to make such disclosures to the Applicants (and, in any event, there was no cause to make any such disclosures in the circumstances). They say that even if it could be said that the Respondents ought to have made any such disclosures, not doing so would not amount to serious misconduct or serious neglect and/or serious incompetence.
As to the failure to disclose the breach of Undertaking, the Respondents say that they did not know that the Password had been provided to Mr Corry in breach of the Undertaking until they were so told in HWLE's letter of 18 July 2019; that, as soon as that happened, the Respondents looked further into the matter, confirmed that the breach had occurred, and conceded as much in their letter dated 26 July 2019 to HWLE; and that, although the Respondents denied disclosing the Password to Mr Corry prior to that correspondence, they say that that was because they did not know that that had occurred, and they believed they had not done that. It is submitted that, given their state of mind and the fact that the disclosure was inadvertent, the denials (although now known to be incorrect) are said to be reasonable.
In those circumstances, it is said that there is no substance to the allegations that the Respondents' conduct involved serious neglect or serious incompetence (Points of Claim at [81]); and that the allegation of serious misconduct (Points of Claim at [80]) fails because it relies on the Respondents knowing that the Password had been disclosed and falsely representing to the contrary, an allegation not supported by the evidence.
As to the complaints made in relation to the investigations carried out by the Respondents following 23 April 2019, the Respondents say that on receipt of the 23 April 2019 email from HWLE they acted promptly and took serious steps to address the matters in that letter, namely: the Second Respondent sending the urgent email to the directors of Medicina seeking urgent instructions; checking the sent items in their electronic mailboxes to confirm they had not sent the password (though neither believed he had done so); and the Second Respondent speaking to the relevant employees of Miller & Prince and to Mr Ghaly (and he believed also Mr Singh and Mr Goradia).

[66]

Finding as to (ii)

I do not accept that the evidence establishes to the requisite standard of satisfaction (the Briginshaw standard) that there was a deliberate concealment of the fact that the Password had (inadvertently) been disclosed. In that regard, I do not accept that there was some kind of "fake" investigation (or no investigation at all).
As to the submission that the explanations proffered by the Respondents were "inherently improbable", I note that evidence is said to be "inherently" or "glaringly" improbable where it is "contrary to compelling inferences of the case", so "incredible and unreasonable that no reasonable person could accept it", "inherently incredible", "contrary to incontrovertible facts" or subject to "inherent contradictions" (see, for example, Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 (Fox v Percy) at [28]-[29], [42], per Gleeson CJ, Gummow and Kirby JJ; State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) (1999) 73 ALJR 306; [1999] HCA 3 at [63]-[64], per Gaudron, Gummow and Hayne JJ; at [93], per Kirby J; Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 59 ALJR 842 (Brunskill) at 844, per Gibbs CJ, Wilson, Brennan, Deane and Dawson JJ; [1985] HCA 61; Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479; [1993] HCA 78; Abalos v Australian Postal Commission (1990) 171 CLR 167 at 178ff, per McHugh J, Mason CJ, Deane, Dawson and Gaudron JJ agreeing; [1990] HCA 47; Holman v Holman [1964] 5 FLR 406 (Holman) at 409, per Sugerman J, Richardson and Macfarlan JJ agreeing; and Saleh v Romanous (2010) 79 NSWLR 453; [2010] NSWCA 274 at [49]-[50], per Handley AJA, Giles JA and Sackville AJA agreeing).
Evidence is not glaringly improbable merely because there is conflicting testimony or conflict between compelling but not conclusive documentary evidence and other evidence (documentary or oral) (see Fox v Percy at [25]ff, per Gleeson CJ, Gummow and Kirby JJ; at [88], per McHugh J; Hecron Ltd v Cousins [1990] NSWCA 93). To accept that evidence is glaringly improbable is to acknowledge that it would constitute an injustice to accept it, such that, on appeal, the finding would be set aside. Evidence is typically shown to be glaringly improbable where it is contradicted by "uncontroverted facts" (such as uncontested oral testimony, or uncontested contemporaneous documents), or by compelling inferences of the case (such as may be drawn from the "inherent commercial probabilities", or "objective commercial probabilities" of the facts).

[67]

(iii) Failure to disclose Second Corry Email Account/use thereof

Next is the alleged failure to disclose the Second Corry Email and use thereof.

[68]

Applicants' submissions

The Applicants say that the Notifications Alert protocol that was established in effect enabled Mr Corry to monitor the Applicants' access to the Dynamics Account without the Applicants knowing they were being monitored, and to know which documents the Applicants were aware of within the Dynamics Account and which documents they intended (or might intend) to use, to prove their claims in the proceedings (see Points of Claim at [32], Mr Wallman's affidavit at [49]-[55]).
Mr Corry received such Notification Alerts via the Second Corry Email Account from at least 3 April 2019 (Points of Claim at [33], Mr Wallman's affidavit at [49]); and that, in the period 3 April 2019 to 3 June 2019, at least 102 Notification Alerts were received by the Second Corry Email Account (Points of Claim at [34], Mr Wallman's affidavit at [55]); and that Mr Corry, via the Second Corry Email Account, forwarded several of these Notification Alerts to the First and Second Respondents (including emails sent on 11 April 2019, 12 April 2019, 13 April 2019, 24 April 2019, and 24 April 2019; receipt of which is admitted by the Respondents).
It is submitted that, in the circumstances, the Respondents were aware that Mr Corry had access to the Dynamics Account (contrary to the 21 February 2019 Orders and 14 March 2019 Orders), and that he was monitoring the Applicants' access, and that he was using that his own access to identify the documents that the Applicants were looking at as part of their preparation of the 2019 Proceeding. It is said that the Respondents themselves were aware of the documents that the Applicants were looking at from the Dynamics Account, and, in so doing, they and Mr Corry obtained a significant unfair forensic advantage (Points of Claim at [36]).
The Applicants contend that the Respondents were obliged, as officers of the Court, on and from 11 April 2019 upon receipt of the first Notification Alert, to disclose to the Applicants and the Court: first, the fact that Mr Corry had access to the Dynamics Platform despite the regime established by the 21 February 2019 Orders and the 14 March 2019 Orders (which I interpose to note raises the vexed question of the proper construction of the Orders that I have considered above and the Respondents' understanding thereof); and, second, the fact that Mr Corry was "secretly monitoring" the Applicants' evidence review of the contents of the Dynamics Platform and reporting to the Respondents. It is said that the Respondents' failure to do so constituted serious misconduct.

[69]

Respondents' submissions

The Respondents say that the allegations as to the failure to disclose that Mr Corry had access to the Dynamics Account in the period from 11 April 2019 depends on acceptance of the Applicants' construction of the 21 February and 14 March 2019 Orders; and should fail for the reason that, if Mr Corry was always entitled to access the Dynamics Account, then there was nothing inappropriate with him doing so, and no call for the Respondents to tell the Plaintiffs that had occurred. The Respondents rely upon what was said at the 16 May 2019 hearing (as referred to above) as consistent with that conclusion. Alternatively, even if the Applicants' construction of the Orders is found to be correct, it is submitted that there was no serious misconduct, serious neglect, or serious incompetence on the part of the Respondents for the following reasons.
First, that the Respondents' understanding as to the effect of the orders (even if wrong) was reasonably held and resulted from the Applicants' poor drafting of the orders; or the Applicants' failure to seek additional or other more specific orders. It is said that the Applicants' conduct cannot be divorced from that understanding, and there cannot be a finding of serious misconduct and the like when a person reasonably does not appreciate that there was any requirement to act differently.
Second, that the Applicants' solicitors knew or ought reasonably to have known that Mr Corry had accessed the Dynamics Account because, as early as 27 February 2019, Mr Corry was using another email address with the same domain as the First Corry Email Account (and all of the other users identified in the Independent Computer Expert's 21 February 2019 Report), namely legal_ac@nexgenpharma.com.au. It is noted that the Second Respondent explained in cross-examination that he believed that the Applicants or their solicitors were well aware that Mr Corry had access to the Dynamics Account, including via other users who accessed the platform. It is said that the detailed information provided by Mr Corry in his 26 March 2019 affidavit put the Applicants on notice that he had access to the Dynamics Account, and that the timing of this is highly significant because the Applicants allege that the obligation to disclose on the part of the Respondents only arose on 11 April 2019 (some three weeks after it is said that the Applicants must have known, or ought reasonably to have known, of Mr Corry's access). It is said that, even if the Applicants' solicitors failed to appreciate that "obvious state of affairs" by their own neglect or incompetence, it was reasonable for the Respondents to assume that the Applicants and/or their legal representatives did understand this.

[70]

Applicants' submissions in response

In response, as to what the Notification Alerts disclosed, the Applicants say that: the Respondents knew that Mr Corry was able to determine whether the Applicants were looking at Dynamics or SharePoint (noting that the First Respondent accepted that whether Mr Corry was monitoring the Applicants "on SharePoint or looking at them on Dynamics", he understood that "Mr Corry was able to work that out") (T 108.19-22); the First Respondent accepted that he knew, from the Notification Alerts, that "whatever the plaintiffs were looking at, this shows that Mr Corry was able to watch what the plaintiffs were doing (T 108.16-18); the Second Respondent understood that SharePoint contained formulas (for medications) and he had obtained that understanding from the First Respondent (T 180.21-181.1). The Applicants point to Mr Wallman's evidence in his 7 May 2019 affidavit at [22] was that SharePoint was a screen on the Dynamics Account, about which he was not challenged in cross-examination.
The Applicants accept that the 11 April 2019 Notification Alert does not disclose on its face when it was set up but they say that its name ("Bova Compounding Alert Policy") and the fact that it was sent to the Second Corry Email Account, together with the fact that Mr Corry was forwarding it to the Respondents, give rise to the strong inference that Mr Corry himself set it up; and that in any event, he was clearly a recipient of the alert policy. It is noted that the Notification Alert: identified the file that had been accessed and the date and time of that access; and was accompanied by a commentary from Mr Corry.
Insofar as the Respondents submit that, even if they had examined the hyperlinks associated with each of the Notification Alerts, it would have revealed very little about the files that had been accessed, the Applicants point to the hyperlink set out in the 11 April 2019 Notification Alert, which they note discloses that the item under review was the final master manufacturing formula records for Pimobendan 2.5mg (the issue of pharmaceutical formulas being the nub of the confidential information claim). In response, the Applicants say that it is difficult to reconcile the Respondents' submission (at [153]) that the Notification Alerts revealed nothing of interest or utility to the Respondents, particularly in light of the First Respondent's reaction to receiving the 24 April Notification Alert. The evidence given by the First Respondent about that Notification Alert is said to have been "absurd"; and an obvious attempt to avoid accepting the forensic advantage that Notification Alert provided.

[71]

Respondents' response

The Respondents say that the analogy the Applicants seek to draw with the decision in Expense Reduction and Solicitors' Conduct Rules rr 6 and 31 is inapt. The Respondents say that their knowledge of the Applicants' review of files on the "live" Dynamics Platform bears no comparison with the retention by an opposing solicitor of confidential privileged material.
Further, it is submitted that there is nothing inappropriate about the First Respondents' email of 24 April 2019. It is noted that the Applicants had complained about their limitation on access to the Dynamics Platform on 23 April 2019. In the course of investigating this allegation, Mr Corry informed the Respondents that HWLE had accessed the Platform on 24 April 2019. It is said that the First Respondent regarded that information as contradicting the Applicants' assertions and was proposing to use the information to "discredit" the Applicants if they persisted with their allegations; and it is submitted that this reflected a strategic and forensic approach to a disputed issue which had emerged at that point in the proceedings.

[72]

Finding as to (iii)

As to the failure to disclose the existence of the Second Corry Email Account per se, I am not persuaded that there was serious misconduct; nor that there was serious incompetence. I am of the view that there was sufficient scope for confusion as to precisely what was the operation of the Dynamics Account (and the operation of the Orders); and that, as a result, no finding should be made of serious misconduct or serious incompetence. I consider that it is at least open on the evidence to conclude that the Respondents (to the extent they turned their mind to the issue) operated on the basis that the Applicants (on receipt of the email communications from the Second Corry Account) knew the same as the Respondents then did about access to the Dynamics Account.
What I have real difficulty with (and what I consider amounts to serious incompetence in the sense of a serious failure to be cognisant of their professional and ethical obligations in this regard) is with the Respondents' non-disclosure of the fact that Mr Corry was secretly reviewing the Applicants' access to the Dynamics Account (once that became apparent to them after receipt of the Notification Alerts).
I consider that it must have been obvious at the time of the 21 February 2019 Orders and the 14 March 2019 Orders that the Applicants were proceeding on the basis that integrity to the Dynamics Account would be preserved by the provision of the Password to the First Corry Email Account. That must be the case in that the Independent Computer Expert was being instructed to obtain "control" in order to preclude the Dynamics Account being tampered with; and the purpose of the regime for downloading the Dynamics Account was understood by everyone to be in order to preserve the integrity of what was on that account at the time it was downloaded. Where that regime came to grief, so to speak, was when the decision was made to inspect documents on the Dynamics Account by access to the "live" platform, coupled with the problem that the imaged version was unintelligible.
However, while I accept that there was scope for a genuine misunderstanding as between the practitioners as to the issue of access to the Dynamics Account going forward from the 21 February 2019 Orders and the 14 March 2019 Orders, there is nothing to suggest that the Applicants were aware that Mr Corry was able to monitor their review of the documents on the Dynamics Account.

[73]

(iv) Failure to disclose deletion of documents

Next there is the alleged failure to disclose deletion of documents.

[74]

Applicants' submissions

Similarly to the position taken by them in relation to the breaches of the Undertakings, the Applicants contend that it is open on the evidence to conclude that the Respondents, knowing that there had been deletions of material on the Dynamics Platform, decided to conceal that information from the Applicants, therefore constituting serious misconduct. However, again, they say that it is sufficient for the purposes of the application to conclude that the failure to provide this information to the Applicants was the product of serious neglect or serious incompetence.
As noted above, the Applicants point to Mr Corry's email sent on 24 April 2019 which they say made clear that there had been "bulk" deletion of records from the Dynamics Account (albeit that Mr Corry asserted that those records had been manually re-entered). The Applicants also rely in this regard on the May Affidavits (i.e., the affidavits filed and served by the second to fifth defendants following the 16 May 2019 Orders), which they say make no reference to the email from Mr Corry of 24 April 2019 which referred to the fact that there had been "bulk" deletion of records within the Dynamics Account.
The Applicants say that: the references to the deletion of documents in the May 2019 affidavit prepared by Mr Ghaly on behalf of Medicina are references to answers given by employees of Medicina who were asked if they had deleted or altered any documents in the Dynamics Account; and to which those who answered yes, all replied in identical, or near-identical terms, namely "Yes, worksheets that contain errors, or that have been duplicated" (see at [9], answer G); and the references to the deletion of documents in the affidavit of Mr Ghaly are limited to "the correction of entries" while processing prescription orders (see at [12]) and the deletion of three products that were "replicated entries in the system" (see at [15]).
To the extent that the Respondents rely on those responses as evidence that they complied with the 16 May Orders or otherwise fully disclosed the extent of the defendants' knowledge of deletions from the Dynamics Account, the Applicants say that the information provided in those two affidavits plainly sought to minimise or otherwise play down the significance of the relevant deletions, and entirely omitted any reference to the bulk deletion of records.

[75]

Respondents' submissions

As to the reference in Mr Corry's email sent on 24 April 2019 at 7:59am to data deletion, the Respondents submit that, viewed in its entirety and in context, the email did not suggest that there had been any "nefarious" deletion of documents by Mr Corry or anyone else; noting that Mr Corry had emphasised that "we need more information"; that Mr Corry also advised in the email that the Applicants were continuing to access the Dynamics Account via the First Corry Email Account; and that there had been major updates to the Dynamics Account by Microsoft over the Easter break.
The Respondents emphasise that the Second Respondent sought instructions directly from Mr Ghaly (and to his best recollection, also from Mr Singh and Mr Goradia), and received confirmation that they did not have access to the Dynamics Account and they had not caused any interruption to the Dynamics Platform; and that Mr Corry's own solicitor also wrote setting out his own denials in respect of the allegations.
The Respondents suggest that, insofar as Mr Wallman said that he was comforted that he had sufficiently locked Mr Corry out of the Dynamics Account because of Mr Corry's communications complaining and demanding access, this amounted to acceptance by Mr Wallman of what Mr Corry had said at that time (and it is inconsistent therefore for the Applicants to argue that it was untenable for the Respondents to accept what Mr Corry said in his 24 April 2019 email). Further, it is said that, if Mr Corry was not to be believed, then that was a further reason not to convey what he had asserted in his email and not to include reference to it in the May Affidavits (cf the Applicants' submissions at [163]).
The Respondents say that it was not for them to seek to interrogate Mr Corry (who was separately represented), nor for them to disbelieve what he or his solicitors asserted; and that it was reasonable, in all of the circumstances, for them to conduct themselves on the basis that what they had been told was accurate.
It is submitted that a further reason why the Respondents could not disclose the matters addressed in Mr Corry's 24 April 2019 email is that the email, sent to both Respondents and copied to the other directors of Medicina, was a confidential and privileged communication. They say that it would have been entirely inappropriate for the Respondents to disclose it (or its contents) to the Applicants or their solicitors.

[76]

Finding as to (iv)

The difficulty, as I see it, with the response to the 29 April Letter in relation to deletion of documents is that it does not make clear that there had been the deletions referred to in Mr Corry's email. Instructions as to those deletions should have been conveyed to the Applicants. Those matters could have been conveyed without forwarding the email and without divulging privileged information, or instructions should have been obtained as to how that could be conveyed. Similarly, I am troubled by the fact that the references to deletions in the May Affidavits do not make reference to the deletions that Mr Corry had referred to in his email.
However, I am not persuaded that it was intentionally misleading (and hence is not serious misconduct); and I do not accept that this amounts to serious incompetence or neglect of the Respondents' responsibilities as officers of the Court.

[77]

Consequences of the Respondents' conduct

Accordingly, for the above reasons, I have found serious incompetence in relation only to the non-disclosure of the Notification Alerts and, more precisely, the fact that Mr Corry was secretly reviewing the Applicants' solicitors' review of the Dynamics Account. I have found this serious incompetence occurred from 24 April 2019. I am not persuaded to the requisite standard of proof that the Respondents realised, in the earlier period from 11 to 24 April 2019, the use that might forensically be able to be made of the Notification Alerts. Therefore, what falls to be considered are the costs incurred from 24 April 2019 (and I do not address the submissions that go to the costs incurred in the earlier periods).

[78]

Applicants' submissions

The Applicants' review of the Dynamics Account prior to 24 April 2019 was not caused by the failure of the Respondents to disclose the matters of which the Respondents then became aware in relation to Mr Corry's access to, and use of, the Dynamics Account. Relevantly, the costs here sought from 24 April 2019 go to the proposition that they incurred the costs of interrogating and investigating their concerns about interruptions to their access to the Dynamics Account; and that the costs associated with that review and investigation have been wasted. They maintain that they were required to investigate the circumstances in which their access to the Dynamics Account was disrupted, which caused them to incur further wasted costs, including in obtaining orders for the defendants to file on affidavit evidence about their knowledge of those circumstances.
The Applicants further maintain that the costs of that review to date are now wasted, as the review would have to be conducted afresh (see Mr Wallman's affidavit of 12 August 2019 at [96]), assuming that were to be possible (about which there appears to be considerable doubt having regard to the difficulty in accessing a legible version of the image downloaded by the Independent Computer Expert after execution of the search orders - see Mr Wallman's evidence at T 33.1; T 33.11-21, T 36.4, T 36.26-29).
The Applicants' submission is that, by reason of their ignorance of the Notification Alert emails, they were deprived of the opportunity to cease their review of the Dynamics Platform earlier; and thus incurred the costs of that review.

[79]

Respondent's submissions

The Respondents put forward a raft of responses in relation to the issue as to whether the costs the subject of the Applicants' claim were incurred "improperly or without reasonable cause in circumstances where the Respondents are responsible"; or that the Respondents' conduct caused the Applicants to incur wasted costs. These include the following: that Mr Corry was the key person responsible for any "relevant mischief" (and nothing the Respondents are alleged to have done or failed to do could have independently caused the Applicants to waste any costs); that the level of culpability of Mr Corry's own solicitors (who were involved and acting for Mr Corry at all relevant times) must be equivalent or higher than that of the Respondents; and that, a significant cause of any wasted costs must be the Applicants' own conduct, or that of their legal representatives (by reference to a variety of matters included criticism as to the flawed drafting of the 21 February and 14 March 2019 Orders, failure to apply for an injunction restraining any access to the Dynamics Account or preventing the defendants from conducting the Medicina business and failure properly to instruct the Independent Computer Expert).
Further, the Respondents point to the negotiated settlement that the Applicants received (it being submitted that, on any view, the work the Applicants undertook and the legal costs they incurred in the proceedings served a useful purpose and resulted in a successful outcome). As to this, the Applicants point out that the settlement occurred before the discovery of the matters now in issue and included no amount referable to costs.
The Respondents also complain that the evidence does not allow for a proper calculation of what was wasted or what proportion should be borne by them.
The Respondents argue that if the Applicants discovered unlawful conduct as a result of the review that was conducted, that material would ultimately be deployed in evidence against Mr Corry or Medicina; and that if Mr Corry learned that the Applicants had accessed a file that revealed he had done something wrong, "that would surely be something useful to the Plaintiffs' case that Mr Corry would read about in a pleading and then in the evidence in due course in any event". Thus, it is said that there was no wasted costs in this regard. Reference is made to the expert evidence adduced by the Respondents that addressed the issue of deletions.

[80]

Applicants' response

In response, the Applicants say that the Respondents' submissions on the question of causation (at [199]-[211]) misstate the standard of proof required for determining issues of causation on the present application and do not engage with the "causation requirement" in s 99 of the Civil Procedure Act, as recognised in Newell at [71], per Beazley P, as Her Excellency then was (namely that "[s]uch conduct must have caused costs to have been incurred that would not otherwise have been incurred but for that conduct").
Insofar as the Respondents assert that, even if they have engaged in serious misconduct, neglect, or incompetence such as to engage s 99 of the Civil Procedure Act, no order should be made because the Applicants have been compensated in full for their costs of the proceedings by virtue of the sum paid as part of their settlement with the second to fifth defendants (Points of Defence at 88), the Applicants say that this contention overlooks that the terms of that settlement exclude costs and point to the evidence of Mr Wallman at T 13.34-40; T 13.42-45; and T 14.23- 26.
The Applicants say that, consistently with Mr Wallman's evidence at T 16.41-43; 17.4-9, the Applicants were, by reason of the Respondents' conduct, deprived of the opportunity to take appropriate steps in light of what the Respondents knew but did not disclose to the Applicants. Relevantly, they say that: on and from 24 April 2019, having ceased their review of the Dynamics Platform, they undertook a process of investigation (without the benefit of the information the Respondents had not disclosed concerning Mr Corry's access to the Dynamics Platform and his use of that access, the disclosure of the Password in breach of the Undertaking and the fact of deletions in the platform).
The Applicants say that it follows that they would have taken different steps to those they in fact took were it not for the Respondents' conduct. They say that the costs they incurred in taking those steps would not otherwise have been incurred but for that conduct; and that the causation requirement in s 99 of the Civil Procedure Act is therefore established. They say that it is no answer for the Respondents to contend, with the benefit of hindsight, that there were other ways in which the Applicants could have ascertained the information the Respondents failed to disclose. The Applicants say that the submissions as to Mr Corry's conduct or the relative culpability of his solicitors (or their own solicitors' conduct) do not in any event establish that the Respondents' conduct did not cause the Applicants to waste any costs; and is an attempt to shift responsibility for their own failings. The Applicants further note that Mr Wallman was not cross-examined as to the contents of his affidavit of 4 October 2019 in support of his calculation of the wasted costs.

[81]

Consequences of the Respondents' conduct

In relation to the consequence of the Respondents' conduct, at least for the purposes of the orders here sought, I outline below my determination concerning causation and quantification of the costs (see at [574]ff).

[82]

Summary of Respondents' position

The Respondents say that this is an unusual (and novel) application brought in circumstances where the Respondents breached an undertaking of the Court "in understandable circumstances"; and where the evidence does not demonstrate that any wasted costs flowed from that inadvertent breach. As adverted to above, they say that the fundamental basis of this application is an allegation that the Respondents, as solicitors for opposing parties in "bitterly fought" litigation, engaged in serious misconduct, neglect or incompetence by not helping the Applicants in the prosecution of the case against the Respondents' clients by failing to reveal various pieces of information in certain circumstances.
They say that this was in circumstances where: the orders of the Court relied on by the Applicants are, on the construction most favourable to the Applicants, vague and ambiguous, and where the cause of any infelicity in the drafting of the orders lies with the Applicants; the disclosures the Applicants say should have been made were either matters which were known or ought reasonably to have been known by the Applicants, or privileged information, or information of no consequence; the Applicants failed in many ways to take steps to protect their own position, to interrogate properly the electronic files they sought and obtained access to, or otherwise to use computer expert services available to them to gather whatever information they required; the alleged wasted costs were costs incurred in conducting proceedings and building a case against defendants which allowed the Applicants to achieve a settlement payment of $1 million within a few short months; the alleged wasted costs are said to be about $100,000 but the evidence relied on in support of the claim is problematic and the amount claimed appears unreasonable; and, if there were any wasted costs, the conduct of many people other than the Respondents have caused such waste. Further, the Respondents say that the extensive hearing time and submissions devoted to the attack on their credit was both unjustified and unnecessary (in that they say that the key questions for determination do not depend on credit).
The Respondents say that, if it be found that the Respondents failed to disclose any relevant matters to the Applicants and that caused any wasted costs (both of which are denied), Mr Corry's own solicitor (who must have been better placed than the Respondents to understand Mr Corry's conduct) would have, in the circumstances, a significantly greater share of responsibility for wasted costs than the Respondents. Pausing here, it is not clear to me what the relevance of this is. The application for costs under s 99 of the Civil Procedure Act does not give rise to a proportionate liability argument so far as I am aware.

[83]

Applicant's response

As to the submission made by the Respondents that the Applicants' approach to the matter reflects an approach to litigation of the type criticised by the High Court in Expense Reduction, the Applicants say that this overlooks the nature of the relevant conduct in the present proceedings and understates its seriousness. The Applicants say that this is not a case (as was the case in Expense Reduction) of an administrative mistake that should have been quickly rectified, but instead led to protracted satellite proceedings and substantial costs. Rather, the Applicants say the present case concerns the fact and consequences of a breach of undertaking to the Court and a failure by the Respondents to disclose that breach; and other matters which the Applicants say the Respondents ought to have done in accordance with their duty to the Court and the administration of justice (and that the Respondent's failure to do so caused the Applicants to incur substantial wasted costs).
As to the Respondents' submission that the Applicants' approach to the present application cannot be reconciled with the usual expected procedure for such applications as stated in Lemoto, the Applicants accept that the procedure to be followed in determining applications for wasted costs must be fair (Lemoto at 92, per McColl JA) and as "simple and summary as fairness permits"; and that ordinarily "hearings should be measured in hours, and not in days or weeks". However, the Applicants say that appropriate steps were taken to minimise the disruption to the hearing caused by the logistical challenges that arose from the COVID-19 pandemic; and they argue that the hearing of the present application was otherwise drawn out by the Respondents having raised the "recent construction argument" for the first time on the eve of the hearing (which they say, as a matter of fairness, needed to be tested in cross-examination); and by the Respondents' "evasive and argumentative responses to that cross-examination in an attempt to tailor their evidence to fit their recent construction argument and to address the inconsistencies with that argument in their affidavit evidence".
As to the way in which the present application has been prosecuted, the Applicants say that the Respondents and their insurer have fought the present application with equal determination and with no expense spared; and note that the Respondents have not "held back" in their criticisms of the Applicants and their legal representatives in seeking to resist the application (referring by way of example to the criticisms levelled against the Applicant' legal representatives in respect of their drafting of the 21 February 2019 Orders).

[84]

Observations in relation to the application

As to the preceding, I here simply restate my observations that I do not accept that it was inappropriate for the Applicants to bring this application, although the criticism of the incurring of disproportionate costs in relation thereto is a different matter. Again, I am firmly of the view that, where there are serious concerns as here concerning aspects of the conduct of officers of the Court, it is incumbent on the Court to ensure that those concerns are ventilated and addressed. In that regard, I am of the view that the present application did, indeed, raise an important issue as to the professional and ethical obligations of the Respondents. Otherwise, again, I refer to my above observations.

[85]

Costs

The Applicants submit that the parties should be heard separately on the question of the costs of the application. In an effort to minimise ongoing costs it would be appropriate for this to be dealt with on the papers and I will make directions accordingly. If it be of assistance, I note that my tentative view is that it may be appropriate for each party to bear his or its own costs in circumstances where there has been a mixed outcome and emotions have run high. However, that is by no means a concluded view.

[86]

Conclusion

As noted above, I have concluded that the failure to disclose that Mr Corry was monitoring the Applicants' solicitors' review of the Dynamics Account amounted to serious incompetence or neglect of their professional and ethical obligations. Full allowance must be made for the exigencies of the litigious environment in which the Respondents were here acting and I have taken into account the level of experience the Respondents then had and the no doubt difficulties they experienced in dealing with Mr Corry (having regard to the tenor of his communications). However, and having regard to the observations of the High Court in a not wholly dissimilar situation in Expense Reduction, I consider that the conduct in question involves, to use the words quoted in Wentworth v Rogers (at [30]) from Lord Wright's speech in Myers v Elman (at 319), a failure on the part of the Respondents to fulfil their duty to aid in promoting in their own sphere the cause of justice.
I accept that this failure caused the Applicants to incur wasted costs in the period from 24 April 2019 to 5 June 2019 in seeking to determine the cause of the disruption that had been experienced to their access to the Dynamics Account. The purpose of the wasted costs jurisdiction is not to punish the legal practitioners but, rather, to protect and indemnify the party who has incurred the wasted costs; and in those circumstances I do not consider it appropriate to engage in a "cheese-paring" exercise in the quantification of those costs (see McColl JA in Kelly at [91]).
In the circumstances, I consider that the appropriate order is to require the Respondents to indemnify the Applicants for the costs incurred by them from 24 April 2019 to 5 June 2019. I note, in this regard, that Respondents have apologised for the breaches involved in the disclosure of the Password and I consider that the undoubted stress that the present application will have caused is likely to have a salutary impact on the Respondents' conduct in future.
I also consider it appropriate for the sum to be ordered as a lump sum costs order having regard to the principles considered in Hamod v State of New South Wales [2011] NSWCA 375 (Hamod) (at [813]-[820], per Beazley JA (as Her Excellency then was), with whom Giles and Whealy JJA agreed), to the discretion conferred by s 98(4)(c) of the Civil Procedure Act (and see also Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 (Harrison v Schipp) at [21]-[22], per Giles JA).

[87]

Orders

For the above reasons I make the following orders: 1. Pursuant to s 99 and s 98(4)(c) of the Civil Procedure Act 2005 (NSW) order the Respondents to indemnify the Applicants for wasted costs in the fixed sum of $70,000, payable forthwith. 2. Direct the parties to file brief written submissions within 7 days on the question of costs, with a view to dealing with costs on the papers if possible.

[88]

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 December 2020

NHB Enterprises Pty Ltd v Corry

At a glance

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Cases Cited (43)

Cited By (8)