PlayUp Limited v Mintas

background 6 PlayUp is an unlisted public company incorporated in Australia with subsidiaries in multiple countries around the world including the United States. PlayUp Inc (PlayUp US) is a wholly owned subsidiary of PlayUp. 7 Dr Mintas was employed as chief executive officer of PlayUp US pursuant to a contract of employment between her and PlayUp US dated 30 November 2019, as varied by a subsequent contract of employment on or about 30 September 2020 (together, Employment Agreement). 8 The Employment Agreement expired on 30 November 2021. Dr Mintas entered into negotiations with PlayUp US about the renewal of the Employment Agreement. Those negotiations were unsuccessful. 9 On 30 November 2021 PlayUp US commenced case no. 2:21-cv-02129-GMN-NJK in the United States District Court, District of Nevada against Dr Mintas as defendant (US Proceeding). PlayUp US made a number of claims in the US Proceeding including that Dr Mintas breached the Employment Agreement, breached fiduciary duties and violated Nevada Uniform Trade Secrets Law. A summary of the US Proceeding appears at [42]-[59] of PlayUp v Mintas. 10 As set out at [1] above, PlayUp commenced this proceeding against Dr Mintas on 1 December 2021. On that day, on the ex parte application of PlayUp, the Court made interim orders pursuant to subs 1324(1)(a) and (4) of the Corporations Act 2001 (Cth) restraining Dr Mintas, her servants and agents from publishing false or disparaging information about, or making false or disparaging statements to certain persons or entities in connection with PlayUp, until further order. 11 On 3 February 2022 PlayUp filed an amended originating application and statement of claim. In its amended originating application PlayUp seeks additional relief including declarations of contravention of ss 181, 182 and 183 of the Corporations Act and compensation pursuant to s 1317H of the Corporations Act in relation to those alleged contraventions. 12 As set out at [2] above, Dr Mintas filed the Stay Application on 2 March 2022. The Stay Application was listed for hearing on 10 May 2022. 13 On 3 May 2022 PlayUp, through its solicitors, sent an email to Dr Mintas (Offer). That email provided: Dear Dr Mintas We refer to PlayUp Ltd's submissions and affidavits filed in response to your Interlocutory Application dated 14 April 2022 (sic) in the above Federal Court proceedings. Background As set out in PlayUp Ltd's submissions, PlayUp Ltd is of the view that: • PlayUp Ltd has brought the Federal Court proceeding against you in your capacity as a former director of PlayUp Ltd; • PlayUp Ltd's claims and the relief it is seeking arises from statutory and fiduciary duties under Australian law that you owed to PlayUp Ltd (an Australian company); • there are serious questions of fact to be tried regarding your conduct as a director of PlayUp Ltd; and • in contrast, the Nevada proceedings relate to your position as a former employee of PlayUp Inc (a US incorporated company) and claims arising from an employment agreement between you and PlayUp Inc (which PlayUp Ltd was not a party to). Based on those matters, PlayUp Ltd's position is that: • its claim is not bound to fail and should therefore not be summarily dismissed; and • the appropriate jurisdiction to hear its claims is the Australian Federal Court. PlayUp Ltd's submissions stated that your Interlocutory Application should be dismissed "with costs". That means that if you are unsuccessful in your Interlocutory Application, PlayUp Ltd will seek orders that you pay the legal costs that PlayUp Ltd has spent in responding to your application. General costs position in Australia Given you are self-represented in these proceedings, we outline below the general costs position in Australia. However, nothing in this communication constitutes or should be construed as legal advice. You may wish to seek legal advice in relation to the matters raised in this communication. Australian courts, including the Federal Court, operate on the general principle that costs follow the event (i.e. the unsuccessful party is typically required to pay the successful party's legal costs). Such costs orders are ordinarily made on a party/party basis (being an amount that the Court or a costs assessor has assessed as being fair and reasonable rather than the actual costs incurred). However, in certain circumstances Australian courts may order the unsuccessful party to pay costs on an indemnity basis (being a much higher proportion of the legal costs and which could amount to all of the actual legal costs incurred). PlayUp's costs responding to your Interlocutory Application PlayUp Ltd has already incurred significant legal costs in responding to your Interlocutory Application. We expect that PlayUp Ltd will incur further costs in preparing for and attending the hearing of your Application. In order to avoid PlayUp Ltd expending further unnecessary costs, PlayUp Ltd offers to agree not to seek a costs order against you for the legal costs it has already incurred if you agree to withdraw your Interlocutory Application. This offer remains open for acceptance until 5:00pm AEST on Friday 6 May 2022. If this offer is not accepted and you fail to obtain a better outcome on the costs of the Interlocutory Application than what is offered by PlayUp Ltd above, PlayUp Ltd will rely on this correspondence to seek a costs order against you on an indemnity basis. In doing so, PlayUp Ltd may present this communication to the Court as evidence that you did not accept a reasonable settlement offer. Further, in those circumstances, PlayUp Ltd will also take all steps available to it to obtain an order from the Court requiring you to pay PlayUp Ltd's costs in responding to the Interlocutory Application. In the meantime, this offer is made on the basis that it is "without prejudice save as to costs". The consequence of this is that the offer is confidential between the parties. You should therefore not disclose it in the court proceedings. (Emphasis in original.) 14 Dr Mintas did not respond to the Offer by 6 May 2022, or at all. 15 From the commencement of the proceeding until 15 August 2022, Dr Mintas was not legally represented. Since 15 August 2022, she has been represented by Clyde & Co. 16 As set out at [3] above, on 3 August 2022 I dismissed the Stay Application.

legal principles 17 The August Orders require Dr Mintas to pay PlayUp's costs of the Stay Application as agreed or taxed. Accordingly, the August Orders would need to be varied in order for the Costs Application to succeed. The Court has a discretion to vary or set aside an interlocutory judgment or order after it has been entered: see r 39.05(c) of the Federal Court Rules 2011 (Cth). That discretion is to be exercised with caution and in accordance with the interests of justice: Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 4) [2013] FCA 318; Luo v Zhai (No 6) [2016] FCA 805. 18 Section 43 of the Federal Court of Australia Act 1976 (Cth) relevantly provides that a Court or Judge has jurisdiction to award costs in all proceedings before the Court including by awarding costs in a specified sum or on an indemnity basis: see subs 43(1), (3)(d) and (3)(g). 19 Rule 40.02 of the Rules provides: 40.02 Other order for costs A party or a person who is entitled to costs may apply to the Court for an order that costs: (a) awarded in their favour be paid other than as between party and party; or (b) be awarded in a lump sum, instead of, or in addition to, any taxed costs; or (c) be determined otherwise than by taxation. Note 1: The Court may order that costs be paid on an indemnity basis. Note 2: The Court may order that the costs be determined by reference to a cost assessment scheme operating under the law of a State or Territory. 20 In Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233 Sheppard J said: 4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. … Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at p 8) in Tetijo, "The categories in which the discretion may be exercised are not closed"… 21 In Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 2) [2018] FCAFC 112 a Full Court of this Court (Nicholas, Yates and Beach JJ) said: [5] Section 43 of the Federal Court of Australia Act 1976 (Cth) confers a broad discretion on the Court to award costs in proceedings. In Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151, Black CJ at 152 stated the principles applicable to a claim for indemnity costs: …it is well established that the starting point for any consideration of an application for indemnity costs is that in the ordinary case costs will follow the event and the Court will order the unsuccessful party to pay the costs of the successful party, on a party and party basis, a basis which will fall short of complete indemnity. Nevertheless, the Court has an absolute and unfettered jurisdiction in awarding costs, although the discretion must be exercised judicially. So indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying the Court in exercising the discretion in that way. [6] A well-established circumstance justifying an award of indemnity costs is an imprudent refusal of an offer to compromise (Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233 per Sheppard J). In such cases, a key question is whether the offeree's refusal of the offer was "unreasonable" when viewed in light of the circumstances existing at the time the offer was rejected (Black v Lipovac (1998) 217 ALR 386 at 432 per Miles, Heerey and Madgwick JJ; CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd [2008] FCAFC 173 at [75] per Moore, Finn and Jessup JJ). [7] The circumstances to be taken into account in determining whether rejection of an offer was "unreasonable" cannot be stated exhaustively but may include, for example: (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree rejecting it. (Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at [25] per Warren CJ, Maxwell P and Harper AJA; Beling v Sixty International S.A. (No 2) [2015] FCA 355 at [25] per Mortimer J). [8] An unsuccessful party is not liable to pay indemnity costs merely because it received an offer to settle on terms more favourable than it achieved at trial and rejected that offer (CGU Insurance at [75]; Black at [217]-[218]). As we observed in the Appeal Reasons, albeit in the context of r 25.14(2) of the FCRs, assessment of the "unreasonableness" of an offeree's refusal of a settlement offer is a broad-ranging inquiry that is not restricted to consideration of the extent or quantum of the compromise offered. 22 On the question of whether indemnity costs should be ordered against self-represented litigants in Mahony v El Bayeh (No 2) [2017] NSWSC 325 Robb J said (at [13]): Generally speaking, courts are more reluctant to make orders for indemnity costs against litigants in person than against legally represented litigants, although, in an appropriate case, they will make such an order. In Bhagat v Royal and Sun Alliance Life Assurance Australia Ltd [2000] NSWSC 159 at [13] Hodgson CJ in Eq observed: … I accept that a court does have to make allowances for the position of litigants in person, and to try to ensure that such a litigant does not lose out because of lack of expertise; although there is a limit to what the Court can do in that regard, while still remaining an impartial determinant of a dispute. The Court may in those circumstances refrain from making orders against litigants in person for conduct that might be considered as justifying orders for costs against represented litigants. By the same token, litigants in person can cause great hardship and expense to other parties, through making allegations and claims that lawyers would recognise as allegations and claims that could not reasonably or even properly be made, and through making proceedings much longer and much more expensive than they would otherwise be, by not focusing accurately on the real issues in the case. Conduct of that nature by legally represented parties would often lead to orders for indemnity costs. Litigants in person may escape the consequence of indemnity costs, but I do not think that the circumstance that a party is a litigant in person is a ground for displacing the ordinary result that costs follow the event. 23 To like effect, in Quach v Health Care Complaints Commission (No 2) [2015] NSWCA 311, Meagher JA said: [9] Where indemnity costs are sought against a litigant in person, the Court ought to consider the competing interests identified by Hodgson CJ in Eq in Bhagat v Royal and Sun Alliance Life Assurance Australia Ltd [2000] NSWSC 159. … [10] This Court has made orders against litigants in person for the payment of indemnity costs where their proceedings were "obviously doomed to fail" and the litigant maintained the proceedings after having been informed of that fact, or of a procedural defect in the formulation of their claim: Reimers v Health Care Complaints Commission [2013] NSWCA 366 at [23] per Barrett JA (Macfarlan and Meagher JJA agreeing). See also Martin v State of New South Wales (No 6) [2011] NSWCA 281 at [8]. 24 Rule 40.13 of the Rules provides that if an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished. Accordingly, a party seeking that costs of an interlocutory application be paid forthwith requires an order pursuant to r 1.35, which confers a discretion on the Court to make an order which is inconsistent with the Rules, or r 1.34, which permits the Court to dispense compliance with any rule. 25 Dispensation with r 40.13 of the Rules will only be appropriate where a party can satisfy the Court that the interests of justice demand such dispensation. In Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 5) [2018] FCA 19 at [11] Perram J said: … What is generally required is not just unreasonable behaviour but unreasonable behaviour which has required a party to incur significant costs over and above what it would have incurred had the case been handled with competence and diligence: Life Airbag. An order that costs be payable forthwith, in that regard, is not to be thought of as some form of especially emphatic indemnity costs order. Although the considerations underlying the two costs rules may, at times, overlap, they are driven by quite different considerations. Where costs are incurred as a result of unreasonable litigation behaviour of the opposing party the usual remedy is the award of indemnity costs: Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225 at 233-34. It is only where unreasonable behaviour has the additional consequence of causing the incurring of significant additional expenditure by the opposing party that Rule 40.13 comes into view. 26 The Court's costs practice note (GPN-COSTS) applies to all proceedings in this Court. It relevantly provides that the Court's preference, wherever practicable and appropriate, is for the making of lump sum costs orders. However, the adoption of a lump sum costs procedure remains at the discretion of the judge. 27 In LFDB v Ms S M (No 2) [2018] FCA 2062 at [6]-[8] I set out the following principles in relation to the award of costs in a lump sum: 6. The Court's power to order lump sum costs is discretionary and may be exercised whenever the circumstances warrant it: Su v Australian Fisheries Management Authority (No 3) [2008] FCA 2018 at [1] (Reeves J). 7. A Full Court of this Court (Allsop CJ, Besanko and Middleton JJ) in Paciocco v ANZ (No 2) (2017) 253 FCR 403 at [16]-[17] explained the following in relation to the Court making orders for lump sum costs: 16. On 25 October 2016 the Chief Justice issued the Central Practice Note: National Court Framework and Case Management (CPN-1) ('Central Practice Note') and the Costs Practice Note (GPN COSTS) ('Costs Practice Note'). The Central Practice Note states that the determination of the quantum of costs of a successful party (in a proceeding) should not be delayed and, to this end, the Court will, where appropriate, facilitate the making of lump sum costs orders. The Costs Practice Note provides that the Court's preference, wherever it is practicable and appropriate to do so, is to make a lump sum costs order so as to finalise costs and avoid potentially expensive and lengthy taxation hearings. It makes clear that the Court should now proceed on the basis that taxation "should be the exception" and confined to matters which are unable to be determined otherwise: Costs Practice Note at [3.3]. The guiding principles are to reduce delay and cost when quantifying costs: Costs Practice Note at [3.1]. 17. The Costs Practice Note provides for the Court to make use of sophisticated costs orders and procedures, and to take such steps as it considers necessary to ensure that it has the requisite level of detail to make a costs determination that is fair, logical and reasonable and to avoid orders that lead to potentially expensive and lengthy taxation hearings: Costs Practice Note at [3.3]. 8. In Bitek Pty Ltd v IConnect Pty Ltd (2012) 290 ALR 288; [2012] FCA 506 at [18] Kenny J said the following in relation to the determination of the appropriate quantum of a lump sum costs order: 18. The starting point for the fixing of costs is the charges rendered by the applicant's solicitors: Beach Petroleum at FCR 124; ALR 165 and Hamod v New South Wales [2011] NSWCA 375 at [820] per Beazley JA (with whom Giles and Whealy JJA agreed). The sum of costs fixed should also be proportionate to the nature, including the complexity, of the case: see Canvas Graphics Pty Ltd v Kodak (A'asia) Ptd Ltd [1998] FCA 23. As Beazley JA said in Hamod, at [820], citing, among others, Beach Petroleum at FCR 123; ALR 164: [820] The approach taken to estimate the costs to be ordered must be logical, fair and reasonable … This may involve an impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment … [Citations omitted.]

playup's submissions 28 In relation to its claim for indemnity costs, PlayUp submitted: (1) the Offer was made pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333 and that it was unreasonable for Dr Mintas to reject it (citing r 25.14 of the Rules); (2) the Offer was made on 3 May 2022, approximately seven days before the hearing of the Stay Application, by which time its preparation of the hearing was at an advanced stage; (3) the Offer was in clear terms and foreshadowed an application for indemnity costs in the event of its rejection; (4) PlayUp's solicitors went to lengths in the Offer to explain the consequences of Dr Mintas rejecting the Offer and why the Stay Application had no real prospects of success; (5) whilst Dr Mintas is a German national, she has shown substantial competence in the English language through her advocacy which demonstrates she was capable of fully understanding the Offer; (6) the Offer was reasonable and proposed a genuine compromise of the Stay Application; and (7) Dr Mintas' self-represented status at the time of the Stay Application is no bar to an award of indemnity costs, especially where Dr Mintas was trained as a lawyer in Germany and practised commercial law. 29 In relation to its claim that costs be quantified in a lump sum and paid forthwith PlayUp submitted: (1) the Stay Application related to a self-contained question which has now been fully resolved; and (2) there are substantial issues yet to be determined in the proceedings which may take a substantial period of time to be finalised and it would be unjust and unfair to keep PlayUp out of its entitlement to the costs of the Stay Application for the duration of the proceedings, in circumstances where Dr Mintas is an individual, residing in the Bahamas, a permanent resident of the United States and does not own any real property in Australia.

Is PlayUp entitled to an order for indemnity costs? 30 I am not satisfied that PlayUp is entitled to an award of indemnity costs. My reasons for reaching that conclusion follow. 31 First, the reference to r 25.14 of the Rules is misconceived in circumstances where there can be no suggestions that the Offer was made pursuant to Pt 25 of the Rules which sets out strict procedures for the making of offers of compromise. 32 Secondly, as is apparent from the terms of the Offer, PlayUp relies on the principles in Calderbank v Calderbank and submits that it was unreasonable for Dr Mintas not to accept the Offer. I do not agree. 33 Dr Mintas is qualified, and practised, as a lawyer in Germany. According to PlayUp she is a commercial lawyer who has only practised for three years. It was apparent and hardly surprising given her training in another jurisdiction, which is not a common law country, and her limited experience as a lawyer, that Dr Mintas was unfamiliar with, and did not understand the system of law in Australia, including applicable practice and procedure in proceedings before Australian Courts. For example, prior to the hearing, Dr Mintas did not understand the distinction between affidavits and written submissions. The principles relating to self-represented litigants are thus applicable in this case. 34 PlayUp and PlayUp US commenced this proceeding and the US Proceeding, respectively, against Dr Mintas. That Dr Mintas sought to stay this proceeding was understandable given her concern that, if the Stay Application was unsuccessful, she would effectively be fighting two claims in two different jurisdictions. 35 While the Stay Application was ultimately unsuccessful, it was not doomed to fail. As Dr Mintas submitted, it raised questions associated with the risk of inconsistent findings between courts (in turn raising questions of comity), the issues associated with Dr Mintas being vexed by being called on to respond to the same factual disputes twice and the impact of PlayUp's subsidiary binding itself to a forum clause. 36 Thirdly, while the Offer's terms were clear, the value of the Offer was not readily discernible to a self-represented litigant. That is, it did not set out the quantum of costs PlayUp had incurred, or was likely to incur such that Dr Mintas could assess the Offer's true value. Rather, it contained a blanket statement that PlayUp had incurred "significant" costs. I accept Dr Mintas' submission that she could not possibly have known that in the short period between the date on which the Offer was made and the date of the hearing of the Stay Application PlayUp would incur costs in the order of $50,000. 37 Fourthly, the time for acceptance of the Offer was in the circumstances and, particularly given that Dr Mintas was unrepresented, unreasonably short. 38 Finally, I am not satisfied that there is any other special or unusual feature about this case which would justify a departure from the usual course. For example, this is not a case where an application was brought in wilful disregard of known facts or clearly established law: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 364; 81 ALR 397.

Should PlayUp's costs be paid forthwith? 39 As set out at [24] above, the default position is that a party in whose favour costs order is made in relation to an interlocutory application must not tax those costs until the proceeding is complete: r 40.13 of the Rules. 40 PlayUp has not established that Dr Mintas acted unreasonably in the proceeding, either by rejecting the Offer or otherwise. Nor is there any evidence before me to suggest that PlayUp has incurred significant costs by reason of Dr Mintas' conduct. 41 The fact that the Stay Application related to a self-contained question which has been fully resolved does not require a departure from the usual course, nor does the fact that Dr Mintas' assets are located overseas. 42 PlayUp has not established that the interests of justice require its costs to be paid forthwith. The circumstances of this case do not warrant a departure from r 40.13 of the Rules.

Should PlayUp's costs be determined in a lump sum? 43 PlayUp's costs of and incidental to the Stay Application amount to $259,975, made up as follows: (1) costs incurred prior to 6 May 2022, being the date the Offer expired: $209,619 (excluding GST); and (2) costs incurred on and from 6 May 2022: $50,356 (excluding GST). 44 PlayUp claims its costs should be paid in a lump sum of $190,102, calculated by adding: (1) two thirds of PlayUp's costs recorded at [43(1)] above: $139,746 (excluding GST); and (2) the whole of PlayUp's costs stated at [43(2)] above: $50,356 (excluding GST). 45 In the event that the Court does not accede to its application for indemnity costs, PlayUp presses for an order that the costs of the Stay Application be paid forthwith and in a lump sum calculated on an ordinary basis. That lump sum, I infer, would be an amount of approximately $173,316.70. 46 However, as I am not satisfied that PlayUp's costs should be paid forthwith, there is no utility in considering whether those costs should be paid in a lump sum at this time. As Dr Mintas submitted, the purpose of making a lump sum costs order is to avoid delay, and to enable costs to be determined quickly and inexpensively. Those goals are not achieved by lump sum costs orders being entered at each interlocutory stage in a proceeding. 47 The appropriate course is to determine the question of whether PlayUp's costs should be paid in a lump sum, if that question remains, at the conclusion of the proceeding.

conclusion 48 For these reasons the Costs Application should be dismissed. 49 As PlayUp has been unsuccessful, it should pay Dr Mintas' costs of the Costs Application as agreed or taxed. 50 I will make orders accordingly. I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Markovic.