TOMRA Collection Pty Ltd v Minto

Determination

It is not disputed that there is a broad discretion in relation to costs orders (s 98 of the Civil Procedure Act 2005 (NSW)), that discretion to be exercised judicially (see Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22] per Gaudron and Gummow JJ); and, I would add, having regard to the requirement imposed by s 56 of the Civil Procedure Act 2005 (NSW) that, in exercising this power, the Court must give effect to the overriding purpose of the facilitation of the just, quick and cheap resolution of the real issues in dispute in the proceedings.
Lest there be any doubt as to the existence of the discretion in this regard, I was taken in submissions to Australian Unity Funds Management Ltd v NorthWest Healthcare Australia RE Ltd [2021] NSWSC 1039 per Black J (at [13]) where his Honour noted authority for the proposition that the default order in r 42.20 of the UCPR (a similar provision to r 42.19 of the UCPR) did not establish a presumption in relation to the costs order to be made (citing Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274 per McColl JA, with whom Beazley JA, as Her Excellency then was, agreed); and that an order contrary to the default order will involve an exercise of discretion to depart from that position contemplated by the rule "where some sound positive ground or good reason for departing from the ordinary course" is established (citing Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at [10], [54]; Bitannia at [54] per Hodgson JA).
Where a matter has not proceeded to a contested hearing on the merits, reference is customarily made to the general rule that the Court will make no order as to costs (Re Minister for Immigration & Ethnic Affairs: Ex parte Lai Qin (1997) 186 CLR 622 at 625; [1997] HCA 6 (Lai Qin)). In Lai Qin, reference was made to the need in those circumstances (for there to be a costs order in favour of one party) to show that the other party's conduct had been so unreasonable as to warrant such an order.
In cases such as Freelancer International Pty Ltd v Matthew O'Kane [2019] NSWSC 159 and Murrumbidgee Irrigation Ltd v M & H Acar Pty Ltd [2019] NSWSC 807 (Acar), I have considered the application of those principles to cases where (as here) the exercise of the discretion as to costs arises under r 42.19 of the UPCR following a discontinuance of proceedings; with a different result following in each of those cases for the reasons there set out. Reference was made in submissions to the decision of Darke J in Crosby v Hanley [2021] NSWSC 507 where the discretion was exercised in the context of discontinuance of a claim for private nuisance; and his Honour there referred (at [14]) among other authorities to OPENetworks Pty Ltd v Myport Pty Ltd [2019] FCA 1659.
Matters to be taken into account when exercising the costs discretion in this context can include whether the plaintiff has in any sense abandoned its claims (see Bitannia at [71]); or whether supervening events have overtaken the position at the commencement of the proceedings rendering further prosecution of them otiose (see In the matter of HCafe Chatswood Pty Ltd [2018] NSWSC 362 (HCafe) at [8]). In that context, although Mr Minto has pointed to the lack of explanation for the discontinuance of the proceedings, it seems to me reasonable to infer that (Lindsay J having determined that TOMRA's position was adequately protected in an interlocutory sense by the undertakings proffered; the non-compete restriction being shortly to expire in February 2022; and the concerns as to Mr Minto taking up a position with the Re.Group group of companies having been overtaken by events by then) a decision was taken that there was no commercial advantage or necessity for TOMRA to pursue the substantive relief sought in the proceedings. In effect, that seems to me to be somewhat of an amalgam between the positions considered in Bitannia and HCafe; and I draw nothing from this.
Also relevant is the conduct of the parties in relation to the conduct of the litigation (whether the plaintiff acted reasonably in commencing them and the defendant acted reasonably in defending them, for example), as well as the question whether the result achieved (albeit by consent) is one that would not have been able to be achieved without the commencement of the litigation (issues of the kind that I considered in Acar).
What is clear is that it is inappropriate to embark upon an exercise of trying an hypothetical action in order to determine the question of costs (see Lai Qin; and more recently Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [8]-[9] per Basten JA with whom Meagher JA agreed, and Payne JA). So, for example, it is not possible on the present application to make any determination as to disputed issues such as whether Re.Group is a competitor of TOMRA or as to the reasonableness of the post-employment restraints; nor is it possible to determine whether the modification of the 16 July Undertakings into the 5 August Undertakings was determinative of the interlocutory application before Lindsay J. Payne JA confirmed (at [30]) that: If both parties to a proceeding which has been settled without a hearing on the merits have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.
In the present case, while there is, in effect, complaint as to the commencement of the proceedings in light of the 16 July Undertakings that had been proffered by Mr Minto, I accept that it was not unreasonable for TOMRA to harbour the concerns that led it to the commencement of the proceedings in the first place (although at least some of the complaint made as to the terms of the initial undertakings - such as the 14 days' notice provision - seems not to have been raised in correspondence at the time; and hence Mr Minto did not have the opportunity of addressing such a complaint before the commencement of proceedings).
As to the position after the proffering of the 5 August Undertakings, while I do not suggest that it was unreasonable to pursue the application for interlocutory relief beyond that point, the fact that they were not accepted though Lindsay J found them to have adequately protected the position of TOMRA on an interlocutory basis) lends support to the conclusion that TOMRA was unlikely to be satisfied with something much less than holding Mr Minto out of employment with Re.Group until February 2022. Whether or not that be the case, TOMRA was in effect unsuccessful on the application for interlocutory relief, albeit that it obtained the benefit of the undertakings given voluntarily and without admission by Mr Minto. Moreover, the fact that Mr Minto was willing to proffer undertakings in the first place (and to modify those undertakings in order to address TOMRA's concerns) means that it cannot be said, in my opinion, that the litigation was necessary in order to obtain something that could not otherwise have been obtained without the commencement of proceedings.
Thus, leaving aside the potential application of the indemnity principle, I would be of the view that there was no good reason to depart from the default position as to costs on a discontinuance of proceedings in this case. The question then is whether the application of the so-called indemnity principle would require a different outcome.
Mr Minto submitted that the indemnity principle is not engaged because on no proper construction of the fee disclosure letter could it be said that Mr Minto would in no circumstances be liable for legal costs (the letter simply noting that Re.Group had agreed to pay for any costs incurred in the solicitors' engagement with Mr Minto). In particular, as noted above, Mr Minto points to the fact that Re.Group is not a party to the retainer agreement, and thus it is submitted that it cannot be said there is no circumstance in which Mr Minto might not ultimately be liable for costs. (In this context, it may also be relevant that, as a result of the refusal by TOMRA to serve the confidential material in the proceeding on Mr Minto's solicitors while they continued to act for Re.Group, in the course of the proceedings Mr Minto's solicitors ceased to act for Re.Group; the impact of which on the company's willingness to meet any costs of the litigation remains unknown and untested.)
Further, it is said that (given that the relief sought would have prevented Mr Minto from working for the Re.Group group of companies) Re.Group had a real interest in the litigation; and in those circumstances the indemnity principle would not apply in any event.
I have concluded, essentially for the reasons put forward by Mr Minto, and adopting the approach taken by Sackar J in Harden, that the indemnity principle does not apply (there being sufficient doubt as to whether Mr Minto might ultimately be required to meet his solicitors' costs and in any event Re.Group having a direct interest in the outcome of the proceedings); and that, even if Re.Group remains willing to indemnify Mr Minto for his costs, this should not in the circumstances result in the exercise of the costs discretion in TOMRA's favour. At the very least, from the provision of the 5 August Undertakings TOMRA received all that that it was ultimately able to obtain on an interlocutory basis; and before then it is clear that there was a willingness on Mr Minto's part to provide assurances that would obviate the need for costs to be incurred in litigation.
Accordingly, I have concluded that there is no good reason to depart from the default position under r 42.19 of the UCPR.

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