Reeve v Aqualast Pty Ltd

REASONS FOR JUDGMENT 1 On 23 July 2012 I made orders providing for preliminary discovery by the prospective respondents. The background to the application for preliminary discovery and my reasons for making those orders are to be found in Reeve v Aqualast Pty Ltd [2012] FCA 679. The matters that remain for determination are: (a) the appropriate orders for costs; and (b) whether certain other orders sought by the prospective respondents should be made.

The parties' submissions on costs 2 As to the question of costs, the prospective applicant, Mr Reeve, seeks an order that the prospective respondents pay his costs of the application. He submits that, although his application was only successful in relation to two out of 14 categories of documents that were sought, had these documents been produced, together with an additional category that the first, second, third, fifth and ninth prospective respondents (the Joseph prospective respondents) had agreed to provide after the commencement of the application, and had certain other things been done, the application would likely have been unnecessary. Mr Reeve submits that it was only after the commencement of the application, and being specifically ordered to do so, that the prospective respondents disclosed that they had no documents falling within a number of categories. He also submits that it was only upon service of the prospective respondents' affidavits in opposition to the application that a large number of matters came to light in relation to the conduct of the affairs of the prospective respondents that had not previously been disclosed. Mr Reeve also submits that the prospective respondents adduced a large body of evidence that went to the ultimate issues in the proceedings he had in contemplation. He submits that this evidence was of limited relevance and unnecessarily prolonged the hearing. Mr Reeve also submits that the prospective respondents took an unnecessarily adversarial approach that unduly protracted and increased the costs of the application. 3 Mr Reeve also seeks an order that, in any event, the fourth, sixth, seventh, eighth and tenth prospective respondents (the Nikolovski prospective respondents) pay his costs of being required for cross-examination at the hearing of the application. The brief background to this is that, on 22 February 2012, the solicitors for those prospective respondents gave notice to Mr Reeve's solicitors that he was required for cross-examination on the hearing of his application. That requirement remained until shortly before the commencement of the hearing. In the meantime, Mr Reeve's solicitors had arranged for his cross-examination to be conducted by video conference. 4 The Joseph prospective respondents submit that they were overwhelmingly successful in resisting the application. They submit that Mr Reeve should pay their costs on an indemnity basis. 5 I should also mention here that they sought an order under r 7.29 of the Federal Court Rules 2011 that Mr Reeve provide security for the costs to be paid to them and that their obligation to give preliminary discovery should be postponed until seven days after that security is provided. 6 I have not ordered preliminary discovery to be given on that basis. Any application to condition the giving of preliminary discovery in that way should have been raised well in advance so that it could have been dealt with during the course of the hearing of Mr Reeve's application. Evidence could have been called on that question and submissions specifically advanced as to whether, in all the circumstances of the case, such a condition was warranted or appropriate. Indeed, had that particular question been raised in a timely fashion, it may have led Mr Reeve to reconsider his position. In my view it is far too late to agitate that question now, after I have already determined that Mr Reeve is entitled to preliminary discovery. I see no reason why I should now effectively revisit the application. 7 So far as concerns the question of requiring security for the payment of costs of the application, it seems to me that such an order would lack practical utility at the present time. 8 The Nikolovski prospective respondents also seek an order for the payment of their costs of the application, including their costs of giving discovery and producing the discovered documents for inspection. They have also sought an order that Mr Reeve provide security for the payment of their costs. As I have stated, I regard that particular application as now lacking practical utility. 9 On the question of costs more generally, the Nikolovski prospective respondents say that a large part of the affidavit evidence on the hearing of the application was directed to an issue in respect of which I found that, objectively speaking, there was no reasonable belief that Mr Reeve had a right to obtain relief against any of the prospective respondents (namely, that they had misused confidential information represented by the Millbase information). The Nikolovski prospective respondents submit that, if the Court were disposed to award them a proportion of their costs only, the Court should take into account that matter and also the fact that Mr Reeve only obtained the right to an order for two out of the 14 categories of documents in respect of which preliminary discovery was sought. 10 I should add that all prospective respondents made a submission that I should not make any order reserving the question of their costs to any proceeding that Mr Reeve might choose to issue, consequent upon discovery being given. I note, however, that Mr Reeve has made no submission to that effect. Rather, his contention is that an order should be made now that the prospective respondents pay his costs.

Consideration 11 The order for costs is in the discretion of the Court: see s 43(2) of the Federal Court of Australia Act 1976. Although Mr Reeve has been successful in obtaining an order for preliminary discovery in his favour, the measure of his success has been very limited indeed. I do not accept his submission that, had there been an agreement to produce the limited categories in respect of which preliminary discovery has been ordered, it is likely that his application would have been unnecessary. Mr Reeve sought preliminary discovery over a very wide range of documents. At the hearing he pressed for discovery in respect of all those categories. For the reasons I have given, his application for preliminary discovery in respect of all categories could not succeed. In this connection I also accept the submission of the Nikolovski prospective respondents that the major issue on the hearing of the application was the alleged misuse of confidential information. In my view, in the present case, the appropriate order for costs is one that reflects what was really the substantial lack of success of the application, overall. 12 For this reason, I am persuaded to the view that, subject to one matter, Mr Reeve should pay the prospective respondents' costs of the application as well as their costs of giving discovery and producing the discovered documents for inspection. I am not persuaded, however, that those costs should be awarded on an indemnity basis. No proper foundation has been laid for costs to be so awarded. 13 The one matter for which an exception should be made is the costs incurred by Mr Reeve of and incidental to making arrangements for his foreshadowed cross-examination to be conducted by video conference. It has not been made clear to me why any such cross-examination was likely to be necessary. In any event, the Nikolovski prospective respondents changed their requirement in that regard just prior to the commencement of the hearing. This meant that those arrangements were rendered completely unnecessary. I note, in this connection, that the requirement for Mr Reeve to be present for cross-examination was made almost three weeks before the hearing of the application. There was ample time before commencement of the hearing for that requirement to be reviewed. Against the possibility that costs have been incurred and wasted in that regard, the Nikolovski prospective respondents should bear them.

Other orders sought 14 As I have indicated above, other orders are sought by the prospective respondents. I have already dealt with their application for security for costs. 15 The Joseph prospective respondents seek an order that, if Mr Reeve wishes to commence any substantive proceeding against one or more of them, that proceeding should be commenced in Victoria. I decline to make that order. There is insufficient material before me on which I feel that such an order could properly be made. For one thing, I would need to speculate about what claims Mr Reeve might seek to make in any such proceeding. In any event, and perhaps more importantly, I do not think it is the function of the Court on an application for preliminary discovery to make orders as to where a prospective proceeding should be commenced. 16 The Nikolovski prospective respondents seek an order that, in the absence of any application being made by any of the parties "in respect of any breach of these Orders" or "in respect of any claim for privilege", the application for preliminary discovery be struck out. I simply do not understand the basis for that order. I decline to make it. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.